An Inquiry Into The Nature And Causes Wealth Of Nations Vol I

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NATURE AND CAUSES

HEALTH OF NATIONS

BY

ADAM SMITH, LL.D.

EDITED BY
>

JAMES E. THOROLD EOGEBS

M.P, FOE SOUTHWAKK

VOL. I

SECOND EDITION

AT THE CLARENDON PRESS
1880

EDITOR'S PREFACE.

THE few materials which exist for a memoir of Adam Smith
were collected by Dugald Stewart, shortly after the Eco-
nomist's death. That they are so few, is probably due to the
fact that Smith destroyed his papers, with hardly any exceptions,
during the last few days of his life. The biography of men of
letters can seldom be extended to any length, except when they
supply the materials for such a purpose, by compiling diaries,
and preserving their correspondence ; or more rarely still, when
a Johnson finds his Boswell.

According then to this authority, Adam Smith was the post-
humous son of another Adam Smith, and was born on June 5th,
1733. The father had been a Writer to the Signet, a profession
equivalent in Scotland to that of an attorney in the Southern
Kingdom. At the time of "his death, however, he was Comp-
troller of the Customs at Kirkcaldy, in Fifeshire. In those
times, the revenue of the Scotch customs was very scanty;
smuggling was all but universal, for the Scotch gentry detested
the House of Hanover and the Methuen treaty with equal
energy. It is stated over and over again by Macpherson, that
the customs of the Northern Kingdom were wholly absorbed by
local charges and the costs of collection.

The comptroller's widow continued to live at Kirkcaldy. Her
own relations resided at Strathendry, a few miles distant. Their
name was Douglas, and it is plain from the history of the house-
hold that the ties between Mrs. Smith and her relatives were
close, affectionate, and lasting.

The child was weakly, and needed unremitting care. Dugald
Stewart informs us that he was treated with anxious indulgence

vi EDITORS PREFACE.

by his mother. Both care and indulgence were repaid by him in
constant and dutiful affection. The mother lived to a great age
in the enjoyment of her son's high reputation, and in the ex-
perience of his solicitous tenderness.

When he was three years old, he was stolen by gypsies from
his grandfathers house, but soon recovered. The Scotch gypsies,
if Scott's descriptions in 'Guy Mannering' and the 'Heart of
Mid Lothian' are correct, met the persecution, to which they
were legally liable, with persevering and successful audacity.
Strathendry is near Loch Leven, and at that time, no doubt, was
excellently situated for marauders.

Smith's early education was obtained at Kirkcaldy Grammar
School. The founders of the Scottish Keformation were pro-
foundly impressed with the necessity of furthering a general
system of school training, and it is certain that the intellectual
and material progress of Scotland has been mainly due to the
early adoption of a national education.

At fourteen years of age, the boy was sent to Glasgow, where
he remained three years. At the age of seventeen, he was
nominated to one of Sncll's exhibitions, and thereupon pro-
ceeded to Balliol College, Oxford.

In the year 1677, a merchant named Sncll founded a number
of exhibitions, for the purpose of educating young Scotchmen at
Balliol College, who should enter into episcopal orders. Another
benefaction, for similar objects, was bestowed by Bishop Warner.
The trustees and patrons of Snell's benefaction were the aca-
demical authorities of Glasgow University.

Twelve years after the date of Snell's gift, the episcopal form
of Church government was disestablished in Scotland. Snell's
gift, however, remained, and from this time forth has been the
means by which promising young Scotchmen are yearly drafted
off to complete their studies at Oxford, and in a college which
is peculiarly connected, through its founders, with the Scottish
nation. It cannot be doubted that much of the reputation,
which that college has won, is to be ascribed to the excellence
of the material selected for it by the machinery of Snell's benc-

EDITOR'S PREFACE. vii

faction. In the kingdom of letters Balliol has done more good
for Scotland than Bruce did.

Adam Smith remained in Oxford for over six years. His
signature on the occasion of his matriculation, 'Adamus
Smith e Coll. Ball. Gen. Fil.; and dated 'Jul. 7 mo 1740,' is
written in a round school-boy hand. I find from an exami-
nation of the Buttery Books, still preserved at Balliol Col-
lege, that he resided uninterruptedly in Oxford, from his
matriculation till August i5th, 1746, for during this time he
drew his commons from the college buttery. It may be worth
while to note that the cost of his first quarter's residence
was ^7 5$. or/., and that this is a fair average of the charges
incurred by an Oxford education, as far as maintenance went,
at that time. His name does not ocfeur in the list of Oxford
graduates compiled by Dr. Bliss. But the Buttery Books style
him Dominus, for the first time in the week ending April
1 3th, 1744. He ceases to draw commons from the buttery
in the week ending with August i5th, 1746, but his name
remains on the books up to and after his return to Scotland.
His original intention appears to have been that of entering into
the orders of the English Church; but he abandoned this pur-
pose at or before the conclusion of his Oxford career.

At hardly any period was the reputation of the University of
Oxford lower than during the time when Smith studied within
its precincts. The literature of this country was at its ebb ; the
University lay in a profound lethargy, for the students were few
and dissolute, the authorities were ignorant and careless. At
the close of the seventeenth century, the University adopted
the extreme positions laid down by the advocates of passive
obedience. The Convocation had solemnly voted that certain
propositions, now accepted as the basis of civil government,
were false, seditious, and impious. This decree was burnt in
1709, pursuant to an order of the House of Lords, by the
common hangman. After the accession of the Hanoverian
family, the University became a focus of Jacobite plots. Many
of the heads of colleges were mixed up in these intrigues, the

viii EDITORS PREFACE.

most active among these adherents of the Stuarts having been
King, the Principal of St. Mary Hall.

It is probable that Smith laid the foundation of that general
and extensive reading which characterises his writings, during
his six years' study at Oxford. There can be no doubt that
he availed himself largely of the Bodleian Library, and collected
from its volumes many of those illustrations of social economy
which are found in the c Wealth of Nations/

Mr. Macfeulloch says that Smith 'does not appear to have
felt any peculiar respect for his English alma mater' I am
not acquainted with any part of his writings which will give
any warranty for such an inference. It is true that he explains,
on economical grounds, the low earnings of the clergy, by the
fact that their education was in great part gratuitous, and
comments, on grounds as precisely economical, on a professorial
system, which was not influenced to activity by any considera-
tions of self-interest, stimulated by any sense of duty, or urged
by any public opinion. The professors in Adam Smith's time
were utterly negligent and indolent. So low had Oxford fallen
as a place of learning, that it is doubtful, if these officials had
depended on fees, whether a self-interested activity would have
procured them pupils, or even an audience.

But though Smith could not probably have confessed to any
assistance from the machinery of the University, he doubtlessly
recognised the advantages which study and leisure gave him
in that place. He mentions among the claims which the Uni-
versity of Glasgow had on his gratitude, that it sent him to
Oxford, and thereby gave him the opportunity for the acqui-
sition of learning.

Smith left Scotland a boy of seventeen years old. He re-
turned at the expiry of his exhibition, to be immediately ac-
knowledged as an able and accomplished scholar. He had
great reason to be grateful to Glasgow, since it had put it into
his power to acquire this distinction, and it is unreasonable to
believe that he was indifferent to the locality from which he
had gathered the materials of his reputation.

EDITOR'S PREFACE. ix

His first patron was Lord Kames. The Scotch bar and bench
have always been honourably distinguished by the literary
abilities of many among those who are actively engaged in
professional duties. Unlike the great majority of their English
brethren, they have constantly risen above the pedantic jargon
&;yl sordid anxieties of their calling, have been eminent thinkers
and writers as well as able advocates. At the suggestion of
Lord Kames, Smith took up his abode in Edinburgh, and in
the winter of 1748 delivered a course of lectures on rhetoric
and belles-lettres. These lectures were attended by several
eminent persons. On this occasion, Adam Smith formed an
acquaintance with David Hume, and commenced a friendship
which grew in strength till the philosopher died.

In 1751 Smith was appointed to the Professorship of Logic
in Glasgow University, and the next year to that of Moral
Philosophy. The latter office had been held by Dr. Hutcheson,
whose lectures had been attended by Smith, and whose theory
of Moral Philosophy undoubtedly formed the basis of that which
Smith subsequently published under the title of 'A Theory of
Moral Sentiments/ in the year 1759. It appears that Smith's
teaching was particularly successful. It is certain that he
looked back to the thirteen years which he spent in Glasgow
as the happiest in his life. It may be added that the above-
named work passed through six editions during the author's
lifetime, and received its last corrections during the few months
which preceded his death.

While he occupied his chair at Glasgow, Smith was in the
habit of giving certain lectures on the elements of Political
Economy, as it was understood in his time, i.e. upon those
artificial regulations and restraints of civil society which states-
men conceive to be necessary or expedient. Here he was accus-
tomed to draw those inferences in favour of a policy of free-
dom, which he afterwards expanded into his celebrated work.
Neither he, nor indeed any one else, had ever elaborated at
that time the laws under which the production of wealth is
effectually maintained.

x EDITOR'S PREFACE.

The modern science of Political Economy has been developed
from a host of negative inductions. Statesmen, misled by the
selfish misrepresentations of reputed experts, have from time
to time controlled and misdirected trade in the fancied interests
of trade. They have attempted to be wiser than nature. They
have seen that order and government have been necessary to
the well-being of society, and that confusion and mischief are
the invariable result of uninstructed self-interest: But, for-
getting that the business of government is to check aggression
only, and to secure every man a fair field for the exercise of
his own labour, they have unconsciously aided aggression, cur-
tailed liberty, and narrowed the field in which labour could
exercise itself. There is of course a border land, for the occu-
pation of which the advocates of liberty and control constantly
contend. The wisdom of government is to limit that border
land to the narrowest possible boundaries. The wisdom of
government in the days of Adam Smith, and frequently enough
in our own time, is to extend the area of government, and with
it, to assert the just control of an administration over the inno-
cent acts of individuals. Such a line of action on the part of
a government may be adopted with the best possible intentions,
as Smith shows in the ninth chapter of his Fourth Book, when
, he sketches the policy of Colbert. Such a policy found its
- earliest and most complete refutation in the reasonings which
are contained in the 'Wealth of Nations.'

In 1763 Smith was induced to take charge of the young
Duke of Buccleuch. In those days, young men of fortune and
fashion made what was called the ' grand tour/ under the
guidance of a tutor. In many cases, beyond doubt, pupil and
tutor were like the Pickle and Jolter of Smollett's novel, and
the tour was nothing better than a round of frivolity and
debauchery. Smith's relations with his pupil were of the most
satisfactory kind. He always spoke of him, says Stewart, with
pleasure and gratitude. It is said, too, that the pupil was
worthy of the tutor.

Dugald Stewart laments that Smith resigned his chair and

EDITOR'S PREFACE. xi

entered into this engagement, on the ground that it 'inter-
rupted that studious leisure for which nature seems to have
designed him/ and prevented the accomplishment of certain
'literary projects, which had flattered the ambition of his youth-
ful genius.' I am disposed to think that an exactly contrary
inference is to be gathered. A man more than forty years of
age is, I suppose, no longer liable to be flattered by the ambition
of youthful genius, and has made up his mind on the literary
projects which he entertains.

Again: the information which he obtained during his residence
in France, and the leisure which followed on his return to
Scotland, were the materials and opportunity of his great work.
He resided for eighteen months in Toulouse, for a short period
at Geneva, and for nearly twelve months in Paris. It was in
this last-named place that Smith formed the acquaintance of
those Economists, whose writings and conversation so much
influenced him in his theory of Public Wealth, and studied
those phenomena which a meddling and mistaken policy had
caused in France.

Smith's friendship with Hume gained him introductions to
the best French society. He became intimate with Turgot,
Qucsnai, Morellet, and many others of that coterie of econo-
mists, whose doctrine was challenging the commercial theory
of Colbert, and the machinery by which that theory was put
in practice. The circumstances of the time, too, were peculiarly
convenient for one who was inquisitive as to the causes which
promote or retard the material progress of society.

He visited France immediately on the conclusion of the seven
years' war. Sismondi says that the Peace of Paris contained
the most humiliating conditions to which France had submitted
since that of Bretigni. She was stripped of her colonies in
the New World, of her settlements and factories in the East.
Dupleix had all but made India a dependency of France. He
had been routed by Olive, and his pretensions annihilated.
Montcalm in the New World had similarly been defeated by
Wolfe, and Canada became one of the British plantations in

xii EDITORS PREFACE.

America. The gain, indeed, was only superficial. Victory had
been obtained by lavish expenditure, and when the reaction
of peace came, and the burdens of war were felt, an attempt
to levy a portion of these charges on the American colonies,
led to the rupture of the ties between them and the mother
country, to the War of Independence, to the establishment of
an Anglo-Saxon republic, and finally, since the passion for
political change is contagious, to the great outbreak of the
French Revolution.

The condition of France during the period in which Smith
resided there is thus described by Smollett in his thirty-sixth
letter, dated March 23, 1765:

'You ask whether I think the French people are more taxed
than the English ? but I apprehended, the question would be
more apropos, if you asked whether the French taxes are more
unsupportable than the English? for, in comparing burdens, we
ought always to consider the strength of the shoulders that bear
them. I know no better way of estimating the strength, than by
examining the face of the country, and observing the appearance of
the common people, who constitute the bulk of every nation.
When I therefore see the country of England smiling with culti-
vation ; the grounds exhibiting all the perfections of agriculture,
parcelled out into beautiful enclosures, cornfields, hay and pasture,
woodland and common ; when I see her meadows well stocked with
black cattle; her downs covered with sheep; when I view her
teams of horses and oxen, large and strong, fat and sleek ; when
I see her farm-houses the habitations of plenty, cleanliness, and
convenience ; and her peasants well fed, well lodged, well clothed,
tall and stout, and hale and jolly ; I cannot help concluding that
the people are well able to bear those impositions which the public
necessities have rendered necessary. On the other hand, when I
perceive such signs of poverty, misery, and dirt, among the
commonalty of France, their unfenced fields dug up in despair,
without the intervention of meadow or fallow ground, without
cattle to furnish manure, without horses to execute the plans of
agriculture; their farm-houses mean, their furniture wretched,
their apparel beggarly ; themselves and their beasts the images of

EDITORS PREFACE. xiii

famine; I cannot help thinking they groan under oppression, either
from their landlords or their government ; probably from both.

'The principal impositions of the French government are these :
First, the taille, paid by all the commons, except those that are
privileged ; secondly, the capitation, from which no persons (not
even the nobles) are excepted ; thirdly, the tenths and twentieths,
called Dixi^mes and Vingti&mes, which everybody pays. This
tax was originally levied as an occasional aid in times of war, and
other emergencies ; but, by degrees, is become a standing revenue
even in time of peace. All the money arising from these impo-
sitions goes directly to the king's treasury ; and must undoubtedly
amount to a very great sum. Besides these, he has the revenue of
the farms, consisting of the droits d'aides, or excise on wine, brandy,
&c. ; of the custom-house duties ; of the gabelle, comprehending
that most oppressive obligation on individuals to take a certain
quantity of salt at the price which the farmers shall please to fix ;
of the exclusive privilege to sell tobacco ; of the droits de controlle,
insinuation, centi&me denier, franchiefs, aubeine, echange et contra-
echange, arising from the acts of voluntary jurisdiction, as well as
certain law-suits. These farms are said to bring into the king's
coffers above one hundred and twenty millions of livres yearly,
amounting to near five millions sterling ; but the poor people are
said to pay about a third more than this sum, which the farmers
retain to enrich themselves, and bribe the great for their protection ;
which protection of the great is the true reason why this most
iniquitous, oppressive, and absurd method of levying money is not
laid aside. Over and above those articles I have mentioned, the
French king draws considerable sums from his clergy, under the
denomination of dons gratuits, or free gifts ; as well as from the
subsidies given by the pays cVetats, such as Provence, Languedoc,
and Bretagne, which are exempted from the taille. The whole
revenue of the French king amounts to between twelve and
thirteen millions sterling. These are great resources for the king ;
but they will always keep the poor miserable, and effectually pre-
vent them from making such improvements as might turn their
lands to the best advantage. But, besides being eased in the
article of taxes, there is something else required to make them
exert themselves for the benefit of their country. They must be
free in their persons, secure in their property, indulged with

xiv EDITOR'S PREFACE.

reasonable leases, and effectually protected by law from the insolence
and oppression of their superiors.

c Great as the French king's resources may appear, they are
hardly sufficient to defray the enormous expense of his government.
About two millions sterling per annum of his revenue are said to be
anticipated for paying the interest of the public debts; and the
rest is found inadequate to the charge of a prodigious standing
army, a double frontier of fortified towns, and the extravagant
appointments of ambassadors, generals, governors, intendants, com-
mandants, and other officers of the crown, all of whom affect a
pomp/ which is equally ridiculous and prodigal. * * * But the
finances of France are so ill managed, that many of their com-
mandants and other officers have not been able to draw their
appointments these two years. In vain they complain and
remonstrate. When they grow troublesome, they are removed.
How then must they support the glory of France? how, but by
oppressing the poor people ? The treasurer makes use of their
money for his own benefit. The king knows it ; he knows his
officers, thus defrauded, fleece and oppress the people ; but he
thinks proper to wink at these abuses. That government may
be said to be weak and tottering which finds itself obliged to
connive at such proceedings. The King of France, in order to give
strength and stability to his administration, ought to have sense to
adopt a sage plan of economy, and vigour of mind sufficient to
execute it in all its parts, with the most rigorous exactness. He
ought to have courage enough to find fault, and even to punish the
delinquents, of what quality soever they may be ; and the first act
of reformation ought to be a total abolition of all the farms. There
are undoubtedly many marks of relaxation in the reins of the
French government, and in all probability the subjects of France
will be the first to take the advantage of it. There is at present
a violent fermentation of different principles among them, which,
under the reign of a very weak prince, or during a long minority,
may produce a great change in the constitution. In proportion to
the progress of reason and philosophy, which have made great
advances in this kingdom, superstition loses ground ; ancient
prejudices give way; a spirit of freedom takes the ascendant.
All the learned laity of France detest the hierarchy as a plan of
despotism, founded on imposture and usurpation. The Protestants,

EDITORS PREFACE. xv

who are very numerous in the southern parts, abhor it with all
the rancour of religious fanaticism. Many of the commons,
enriched by commerce and manufacture, grow impatient of those
odious distinctions, which exclude them from the honours and
privileges due to their importance in the commonwealth ; and all
the parliaments and tribunals of justice in the kingdom seem bent
upon asserting their rights and independence in the face of the
king's prerogative, and even at the expense of his power and
authority. Should any prince, therefore, be seduced by evil
counsellors, or misled by his own bigotry, to take some arbitrary
step that may be extremely disagreeable to all those communities,
without having spirit to exert the violence of his power for the
support of his measures, he will become equally detested and
despised ; and the influence of the commons will insensibly
encroach upon the pretensions of the crown. But if, in the
time of a minority, the power of the government should be
divided among the different competitors for the regency, the
parliaments and people will find it still more easy to acquire
and ascertain the liberty at which they aspire, because they will
have the balance of power in their hands, and be able to make
either scale preponderate.' * * *

Four assemblies, called Parliaments, sat in four different
places. No free commercial intercourse existed between the
various provinces of the kingdom. The peasantry were ground
down by taxation, levied on the most vicious principle, the
hatefuliicss of the impost being made more odious by a capri-
cious system of exemptions. The King, the nobles, and the
hierarchy were engaged perpetually in robbing and humiliating
the people.

The taille was the equivalent of the English tallage. But the
discretionary power of levying this impost had been taken away
from the English monarch as long ago as the days of the Great
Charter. The military tenants of the French monarchy, who
constituted the nobility of that kingdom, were originally bound
to military service a condition originally more onerous than
Vas involved in the taxes levied on the roturier. But for a long

ae before the Revolution, France possessed a standing army,

xvi EDITOR'S PREFACE.

the funds necessary for maintaining which were wrung from
the visible resources of the French peasantry. The indirect
taxation of France combined the least possible productiveness
with the greatest possible oppressiveness, and violated every
canon of financial prudence and equity. I have quoted the
authority of Smollett for the beggarliness of the French
peasantry, because the evidence he gives was taken in the year
during which Smith was in France. Similar testimony could
be supplied from the Tour of Arthur Young, undertaken just
before the Revolution.

It has been objected to Adam Smith and Hume, that they
did not foresee the French Revolution, intimately as they were
acquainted with the state of France. But the objection is
shallow. What is called political prophecy is often mere guess-
work, which no wise man will seriously indulge in. The easiest
way in which weak men think they can gain a reputation is by
sinister predictions of political events. No one can anticipate
the conservative forces of society, no one can gather enough
information to make a safe induction as to the resistance which
may be made to change, or, indeed, as to the forces which will
compel change.

But there is such a thing as political prescience. It is not
difficult to discover the inevitable consequences induced by
certain kinds of political action. This faculty Smith possessed
in the highest degree, in a far higher degree than Hume,
whose sagacity and acuteness he admired so much. Of this
prescience his great work is the most noteworthy illustration.
No person has ever pointed out with more exactness the effects
of a mistaken commercial policy, the invariable reaction from
a course of legislation which does not commend itself to the
moral sense of a nation, and the mischievous consequences
which ensue when a public law gives its sanction to private
selfishness.

Smith returned to England in October, 1766, and very soon
took up his abode at Kirkcaldy. Here he spent ten years in
study and retirement. The trustees of the Duke of Buccleuch

EDITORS PREFACE.

had settled an annuity of ^300 a year on him, in consideration
of his abandoning his Professorship in order to travel with the
young nobleman; and, to a single man, living in Scotland a
century ago, such an income was opulence. In 1776 he pub-
lished the first edition of the ' Wealth of Nations.' Had Du
Quesnai lived till this time, he intended to have dedicated his
work to the French economist whom he admired so much, and
whose merits he thought justified the eulogistic language of the
Marquis de Mirabeau (vol. ii. p. 264).

His friend Hume died shortly after the publication of the
' Wealth of Nations.' I have seen the copy of the first edition,
now (^869) in the possession of a distinguished economist (Mr.
Babbage), which Smith sent to Hume, and which contains a
characteristic note by the author on the fly-leaf. The intimacy
which subsisted between the economist and the historian, and
the warm expressions of regard with which Smith spoke of his
friend, provoked censure and misrepresentation. Perhaps there
has been no age of ecclesiastical history in which orthodoxy
was more strict, and practice more lax, than in the latter half
of the eighteenth century. Smith neglected to answer his
critics.

Smith's work was translated into most modern languages ;
by Gamier into French, by Ortiz into Spanish. Five English
editions were published during the author's lifetime ; and though
othor writers have occupied the field, and have extended the
inquiries of the first master of this science, the work is and ever
will be a great English classic, besides being a landmark in
economical history.

The quick sagacity of Pitt immediately appreciated the
c Wealth of Nations/ It is known that he read it diligently,
and valued it highly. It is certain that had he not been,
betrayed or coerced into a war with the French Revolution, he
could have made its reasonings the basis of his fiscal and com-
mercial policy. Unfortunately, however, he made his choice,
and sacrificed his own judgment. Constrained to abandon the
course of action which his better sense commended, and at his wits'

VOL. I. b

xviii EDITOR'S PREFACE.

end for money, he adopted any and every expedient for raising
supplies. After his death, his finance was parodied by incapable
successors, and England was not only drained by the great war,
but crippled by the foolish budgets of Vansittai\t. The progress
of economical reform was retarded for half a century. The
Opposition was ignorant; for Fox declared that he could not
understand Smith, and the Government was ignorant and
desperate. The principles of free trade, announced in the ever-
memorable petition of Mr. Tooke (known as the Merchants 1
Petition), and still forming an economical creed, were ultimately
carried out by the most illustrious of Smith's many disciples,
Cobden.

For two years after the publication of this work, Smith
resided in London. In 1778, he received the appointment of
a Commissioner of Customs for Scotland, from Lord North's
Government, and through the interest of the Duke of Buccleuch.
The official duties which such an appointment entailed were
probably not very onerous. At any rate, Smith paid many
visits to London during the time in which he held this office.
It has been said that thousands of persons could have fulfilled
the function as well as Smith, and that his leisure, which would
have been occupied in the more congenial task of political
philosophy, was absorbed in the details of Custom-house
business. In all likelihood, the office was almost a sinecure,
and thus anybody might have been a commissioner, because
such a functionary was unnecessary, But there is nothing more
speculative than the consideration of what a great thinker
might have done, if he had leisure and will to do what he con-
templates doing. The titles of books which have never been
commenced are, we may be sure, ten times as numerous as the
contents of an exhaustive catalogue of finished productions.
That Smith had abundant leisure during his official life is
perfectly clear from the admission of his biographer, that he
made several visits to London while he held his office.

That Pitt was greatly impressed with Smith's reasonings is
well known* It is said that the modifications introduced by

EDITORS PREFACE. xix

the Minister into the systematic depression of Irish trade,
were due to the arguments alleged in the ' Wealth of Nations.'
The English landowners were afraid that the competition of
Irish produce in the home markets would lower their rents;
and they thereupon contrived a series of enactments against
Irish agricultural produce as stringent and severe as those which
a previous generation had passed against the liberties of the
Irish Roman Catholics. Smith had shown that these enact-
ments were as useless for the purpose which they were designed
to effect, as they were irritating to the Irish people.

It appears, too, that another consequence of the attention
which Pitt paid to the Scotch economist was the commercial
treaty with France, Sept. 26, 1786, negotiated by Mr. Eden,
subsequently Lord Auckland, on the part of England, and M. de
Reyneval on that of France. This instrument, which contains
forty-six clauses, stipulates for perfect liberty of commerce and
navigation ; gives in the case of war breaking out between Great
Britain and France, twelve months to any resident foreigner of
either nation in which to settle his affairs; annuls, while the
Treaty lasts, the regulations of the Navigation Laws ; gives
liberty of religious worship, and supersedes the necessity of
passports. French wines were to pay no higher duties than
those of Portugal, and the duty on brandy was to be reduced.
Duties on British manufactured goods were to be ad valorem,
and range between 15 and 12 per cent. The subjects of each
country were to be precluded from the privilege of accepting
letters of marque, and fitting out privateers against the com-
merce of either country, should it be at war with some other
power. The remainder of the Treaty is dictated in the same
spirit, and the whole character of the instrument resembles that
more famous Treaty negotiated by Cobden three-quarters of a
century after the date of the first.

Pitt sincerely desired peace with France. He knew that the
fiscal and political reforms which he longed to effect could be
effected only by the continuance of peace. Great Britain was
suffering under the weight of debt and taxation which had

xx EDITORS PREFACE.

been accumulated since the Revolution, and which had been
increased with alarming rapidity during the War of Inde-
pendence. The Minister wished to amend the representation
of the people, to emancipate the Roman Catholics, to adopt the
principles of free trade, and to put the revenue on a sound and
intelligible basis. He would have effected all these ends, had
he not suffered himself, with great reluctance, to embark in the
largest and most disastrous of the wars in which the United
Kingdom was ever engaged. He achieved the legislative union
of Great Britain and Ireland, and little besides.

In 1787, Smith was elected Lord Rector of Glasgow Uni-
versity. The Scotch Universities have chosen, after the manner
of many foreign institutions of the same character, and by
universal suffrage among their members, an officer, for some
short period, whose duty originally consisted in their govern-
ment during his tenure of the function. In course of time, the
election has been a mere honour, conferred on some distinguished
person, and intended to convey a recognition of the services
which such a person has rendered to letters, or of some analogous
eminence. Smith expressed his satisfaction at the compliment,
and in his acknowledgment alluded to the benefits which that
University had conferred upon him, by sending him, forty-seven
years before, to Balliol College, Oxford.

His mother had died in 1784, at an extremely old age. His
cousin, Miss Douglas, who had lived in his house for many
years, died four years afterwards. Smith himself, after a tedious
and painful illness, followed them on July 17, 1790. He had
never married, and his library and other effects were bequeathed
to his cousin, David Douglas, who became afterwards a Scotch
judge. His most valuable possession was his library, which he
had collected with great care, and studied with keen relish. He
seems to have been intimately acquainted with French and
Italian, as written languages. He quotes from Spanish authors,
but, as it seems, only from French translations. In his time,
probably, not one educated man in a thousand knew anything
of German. French was the chief vehicle of literature during

EDITORS PREFACE. xxi

the eighteenth century. He is said to have spoken French very
indifferently.

It appears, from the testimony of Dugald Stewart, that Smith
was exceedingly popular among his intimates. Habitually
absent, and constantly absorbed in his own thoughts, he amazed
his companions, when he shook off his abstraction, by the tenacity
of his memory and by his exact recollection of minute particulars.
Hence, says Stewart, he talked constantly as though he were
lecturing, never starting any topic of conversation himself, but
surprisingly prepared upon any subject which others conversed
about. In short, he exhibited the resources and defects of vast
but unmethodical learning.

People who knew him were, however, most struck by the
gentleness and benignity of his manner. He formed hasty
estimates of other men's characters, says his biographer, but
those estimates were much more frequently marked by blind
partiality than by unfriendly prejudice. Like most absent men,
he was odd in his gestures, and shy before strangers. He is sup-
posed to have impaired his fortune by his benevolence, for he
died in moderate circumstances.

Smith, it is said, never sat for his picture. There exist, how-
ever, two likenesses of him. One, the medallion by Tassie, is
stated by Stewart to have been not only an excellent repre-
sentation of his features, but to have given the habitual ex-
pression of his face. The other is a whole-length, drawn by Kay
in the year of his death. These two formed the originals for
the magnificent statue by Gasser, now (1869) standing in the
Randolph Gallery, in Oxford. It may be added, that Smith's
grave is in the churchyard of the Edinburgh Canongate.

The style of Smith's great work is diffuse, and the arrange-
ment of his materials is inartificial. It is said that he composed
with difficulty, and always with the services of an amanuensis.
It is certain that the work was written very slowly, fqp it
occupied the author's leisure during the ten years which in-
tervened between his return from the Continent and the
publication of the work itself. Such order, too, as Smith

xxii EDITORS PREFACE.

adopted, is interrupted by digressions, for one of which he
acknowledges his indebtedness to Mr. Henry Hope, of Am-
sterdam. Some of the disquisitions which are contained in the
work are hardly economical, except on the widest interpretation
of Political Economy; as, for example, those comprised in the
second and third, chapters of the Third Book, and in the first
chapter of the Fifth. It would have aided the method of
Smith's reasonings, had several of the subjects which he dis-
cusses been -confined to foot-notes, or collected in the shape of an
appendix to the -several Books into which the work is divided.

Smith rarely gives notes or references. Dugald Stewart says
that this omission is designed. None of his commentators or
editors have hitherto supplied this deficiency. The present
Editor has attempted, however, to discover, as nearly as he can,
the authorities to which Smith refers in the text. The reader
will no doubt detect some instances in which the reference is
still wanting. But very many are given; and the Editor is
satisfied that those who are acquainted with the labour involved
in hunting after passages in authors, when no hint has been
given of the place in which the passage is to be found, no index
has been supplied to the authority in question, and when the
author quoted is also very voluminous, will admit that such a
labour is no way trivial. The Editor could not have achieved
as much success as he has, in the search into the original autho-
rities to which Smith refers, had it not been for the advantages
of the Bodleian Library, and the ready and intelligent courtesy
of all the officers who serve that great institution. Such foot-
notes as Smith has himself supplied are designated by asterisks,
those of the Editor by numbers. It may be added that in some
cases it has been found impracticable,, after diligent search, to
detect the reference made in the text. Those who study Smith
will find that, like many .other persons who are possessed of a
gre^t memory, he trusted to his own powers of recollection,
rather than to notes made in reading. The learning which the
Author brought to bear on the subject was very great, and very
various.

EDITOR'S PREFACE. xxin

Adam Smith was greatly indebted to the Economists. Any
one who studies the admirable treatise of Turgot, c Sur la For-
mation et la Distribution des Kichesses/ can trace the effect of
this great thinker's reasonings on Smith's mind. A similar
influence was exercised by Que&nai, Dutot, Morellet/and others
of the Physiocrates. In the First Book, particularly, passages
will be found which are -almost transcripts from Turgot's divi-
sions and arguments. Nor did Smith always distinguish
between the truths and the fallacies of those eminent writers.
He rebuts, to be sure, their strange doctrine that no labour isf
productive, except that which is engaged in agriculture ; but he
is possessed with the idea that agriculture is the most productive
of all employments, and endorses the famous paradox, that-
nature does nothing for man in manufacture. He is indeed '
close upon a truth, which he does not enounce, that the possible
extension of other industries besides agriculture is due to the
success with which agriculture itself is practised. It is only
from the fact that the labour of those who cultivate the soil is
productive beyond the necessities of the cultivator that other
labour can be devoted to other employments, and it is only as
the art of agriculture is exercised with increasing effect that
the numbers of those who are not so engaged can bo in-
creased.

Mr. Mill comments, more than once, in his 'Principles of
Political Economy/ on the difficulties which surrounded the com-
prehension of some among the most elementary principles of
economical science in an age like that of Adam Smith. The notion
that money is wealth was all but universal a century ago.
The correction of this fallacy, the statement and proof of the
fact that money is mere merchandise possessing one special
characteristic, that it is, of all merchandise, that which in
ordinary circumstances is most easily exchanged was a great
achievement in Smith's time. It is true, as Mr. Mill happily
observes, that the fallacy is 'like one of the crude fancies of
childhood, instantly corrected by a word from any grown person.
But/ continues the same writer, c let -no one feel confident that he

xxiv EDITOR'S PREFACE.

should have escaped the delusion, if he had lived in the time in
which it had prevailed/

The whole course of legislation, as well as the whole current
of public opinion, had flowed in the same groove for centuries
before the publication of the ' Wealth of Nations/ The most
acute of all the thinkers of Greek philosophy had, indeed, briefly
pointed out the meaning and real uses of money, in a singularly
suggestive passage. (Aristotle's Nicomachean Ethics, Book V.
Chap. 5-) The same facts were argued out at greater length in a
treatis^ on the Use of Money, written by Nicolas Oresme, Bishop
of Lisieux, in the fourteenth century. But these truths were
forgotten, and therefore, for practical purposes, undiscovered.

The most energetic of the Plantagenet sovereigns undertook
the control of the currency. Every attempt was made to
prevent its exportation. Not only was such an act forbidden,
but, in order to obviate its contingency, foreign trade was
limited to particular markets, called staple towns, and a high
officer of State, the King's Exchanger, was obliged to superintend,
either in person or by deputy, transactions of foreign trade, in
order to prevent any efflux of the precious metals, and to secure
as large a portion of those commodities as could be obtained.
This official was appointed up to the time of Charles I, when
the last nomination was made in the person of the Earl of
Holland. But the vexatiousness of the interference was felt by
this time, though long before the fallacy of the practice was
detected. The Legislature petitioned against the appointment,
Selden showed. that the patent was illegal, apparently from some
formal irregularity, and the office became obsolete.

Up to this time the operation of the law had been directed to-
wards watching over individual bargains, with a view to securing,
as far as foreign trade was concerned, a favourable balance on
cash. Now, however, a new set of principles were announced.
The Cape Passage had opened a new route to the East, and
Portugal, Holland, and England hastened to take advantage of
this rich market. We, whom modern agriculture has supplied
with the means of obtaining fresh animal food all the year

EDITOR'S PREFACE. xxv

round, can hardly realise the intense desire to obtain those
Eastern condiments, with which our forefathers used to season
their salt winter fare. Hitherto the supply had been precarious,
and the cost enormous. The overland carriage of Eastern
produce increased its price twenty -fold, and the margin of profit
which the new route would offer the successful trader called into
activity the mercantile spirit of the most energetic nations in the
Old World. According to the custom of the time, the trade
with the East was conferred on a corporation in the last year
but one of the sixteenth century.

These adventurers, however, encountered a difficulty at the
outset of their career. There was only one article which the
possessor of this highly-prized Eastern produce was willing to
receive in exchange for his goods, though pepper, the most
cherished of these condiments, grew as plentifully in the tropics
as hawthorn-berries do in England. From the earliest ages,
India has absorbed the silver of the Western world. The fact
had been noted in the time of Alexander the Great, and silver is
still the most advantageous export to those regions. But the
King's Exchanger, and the various penalties of the old law,
stood in the way. No doubt specie was smuggled out of the
country; but it was better to reconsider the question, and to
alter the law so as to suit the overwhelming exigencies of the
case.

The most successful advocate of a change was Thomas Mun.
To be sure, he affirmed the old fallacy, that the wealth of a
country was to be measured by its stores of ;the precious metals ;
but he argued that this desirable result was not to be arrived at
by a meddling supervision over individual bargains, but by a
consideration of the general interests of all the trade in which
a country is engaged. In the present instance it was plain, that
if England was to trade with the East, the law in this direction
was to be relaxed. By foreign trade England obtained her
treasure, since her native mines were too inconsiderable to
supply her deficiencies.

What, he argued, if the quantity of silver needed to effect

xxvi EDITORS PREFACE.

these purchases in the East were allowed exportation? A small
amount would suffice. The profit on the transaction would be
large, for the imported goods could be sold at a far higher price,
and so secure a far larger amount of the precious metals, than
the quantity which it was imperatively necessary must be
exported in order to effect the trade at all. Thus in the long
run, the balance of trade would be on the side of England. Mun
clenched his argument by the happy illustration of the husband-
man, who sacrifices a portion of his food in the shape of seed, as
a necessary condition towards obtaining his crop in harvest.

These reasonings were accepted, and the traders to the East
were permitted to export specified quantities of silver for
specified purposes. It is obvious that while the rule was relaxed
in one direction, under the force of such arguments, the principle
on which the rule was founded was strengthened by the success
of an experiment, which formed an exception, only by virtue
of its exceptional character. The attempt to secure a balance of
trade in the precious metals was no longer an expedient adopted
by a monarch, in order that he might accumulate treasure, but
a fundamental principle, recognised by the Legislature as a
condition of public safety, and endorsed by the acute intelligence
of adventurous and successful merchants. Respectable autho-
rities, it should be remembered, are much more frequently cited
in defence of absurdities and fallacies, than they are in favour
of sound sense ; though, of all sophisms, none is more natural,
and none more unfair, than that which enlists the dogmas of
individual reasoners on behalf of mere abstract inferences. No
one can dispense with authorities as to matters of fact ; but to
allege authority on matters of demonstration is as impertinent
as it would be to bring evidence of character in support of a
scientific proof. It is because Political Economy has so long
been burdened by the reputation of those who have written or
spoken on its principles, that its progress has been so hesitating,
so slow, and so uncertain.

The consequence of adopting the theory of the balance of
trade, which, by the way, Smith carefully distinguished from the

EDITOR'S PREFACE. xxvii

balance of production and expenditure, was that the Legislature
strove to foster trade and manufactures by special enactments.
But it is impossible to foster trade by law, except by conferring
monopolies; that is, by mulcting the general public in order to
provide a stimulus for a particular class of interests. We all
know now that it is wise to do away with restrictions, and to
allow, as far as is compatible with the maintenance of public
order and private right, unlimited freedom to enterprise, in-
dustry, and diligence. The Legislature did more. It strove to
create special industries, to develope particular enterprise, to
assist individual diligence. In course of time, it was found out
that enterprise, industry, and diligence were hindered, instead
of being furthered, by these artificial arrangements.

The first applicants for legislative assistance were the mer-
cantile classes. It was plain that the exportation of such com-
modities as they produced, was, according to the theory of the
balance of trade, more advantageous to the country than the
exportation of agricultural products, or similar raw material.
If it was the object of the State, the highest wisdom of the
community, to secure to itself as much as possible of the precious
metals, it was manifest that manufactured articles, seeing that
they are raw materials, plus the value of the labour embodied
in them, were the best means by which the desirable ends of the
mercantile theory could be achieved. Hence the statesmen of
the seventeenth and eighteenth centuries were as willing to
grant, as the manufacturers and merchants were eager to claim,
the stimulants of legal monopoly. Companies were chartered
for the ends of production and merchandise, and every assistance
which the law could give, or thought it could give, was awarded
to these branches of industry. The example of this country was
followed by France, Colbert endorsing the doctrines alleged by
the English merchant, Thomas Mun.

Meanwhile, these islands regularly exported the surplus pro-
duce of their agriculture. Now it seemed plain that what
was good for merchant and manufacturer would be good for
agriculturists. A sliding scale, under which cheap foreign corn

xxviii EDITORS PREFACE.

was to be excluded, was adopted, for the obvious and plausible
reason that the purchase of foreign corn would drain a nation
of its specie. But such an expedient afforded but an occasional
stimulus. In order to increase the production of the country,
but much more in order to obtain foreign gold, bounties were
bestowed in cheap years upon those agriculturists who exported
that portion of their produce which was proved, by the evidence
of prices, to be in excess of the average wants which ruled in
the home market.

, It is almost superfluous to say, that the protection of the
manufacturer or merchant is a delusive boon. It is true that if
the demand of a nation is urgent if the article it requires is
produced from a limited area, over which the favoured producer
has a control, and for which a substitute cannot be found else-
where, and if, besides, the number of persons engaging in the
trade is strictly limited the monopolist will have an enormous
advantage, and will speedily obtain a great fortune. But no
such article, conditioned as is described above, has ever yet
existed. Nor, again, could any Legislature, other than one
wholly barbarous or rapacious, ever agree to stint competition
in the supply of the necessaries of life. Hence, whatever may
have been the early advantages of those who have been pro-
tected, the superior profits of any particular trade or manu-
facture are soon neutralised by competition. Nay, since the
value of such Government aid is generally overrated 011 the part
of those who are invited to enjoy it, it is ordinarily found that
the average profits of protected trades are lower than those
which are obtained from unassisted industry. Commercial
history will supply a host of instances illustrating this position.
Such trades and manufactures as cling to protection are con-
tinually crying out that they are being ruined, even under the
advantages which a legislature gives them, and, like drunkards
vitiated by dram-drinking, are perpetually demanding additional
stimulants and provocatives.

It constantly happens, too, that while protection is of no
aVail to increase the profits or improve the position of the pro-

EDITORS PREFACE. xx i x

ducer, its withdrawal is not only minatory in the highest degree
to the imagination, but frequently disastrous to the experience
of those who have hitherto been accustomed to it. The occu-
pation has been fostered into an unhealthy activity. It ought
not to have been undertaken at all, or it should have been
undertaken more cautiously, and by fewer persons. When the
reaction comes, it is not easy to remove capital from the under-
taking; it is difficult to liberate labour from the routine; it is
impossible to recover outlay made upon such plant as is avail-
able for this kind of industry only. Hence, however just and
expedient it is, both in the ultimate interests of the particular
calling and for the general good of the public, to withdraw
these factitious aids, the process not only awakes considerable
alarm, but not infrequently entails great temporary loss.

It should be added, that in Smith's time certain solid ad- '
vantages appeared to attach themselves to commercial monopoly. ;
The English merchants were few, prosperous, and wealthy.
The West India planters throve, apparently, under the colonial
system, in reality from the fertility of the islands which they
occupied. The demand for their produce, and the custom of
negro slavery, which, under certain circumstances, involves
material advantages, gave a superficial prosperity to those
Nabobs of the Caribbees, apparently counterpoising the inevit-
able moral evils of that slavery which gave them their wealth.
How powerful the mercantile class was is to be discovered from
their successful resistance of Walpole's excise scheme, and the
hindrance which they put on the establishment of bonded ware-
houses. It should be remembered, too, that the all but universal
adoption of a guild or company system in chartered towns, the
laws enforced against all combinations of labourers, and the
excessive severity of the law of parochial settlement, made most,
kinds of labour cheap, and secured a somewhat beneficial
monopoly to the employers of labour.

With these facts before him, Smith concluded that the adop-
tion of those principles which he argued for and upheld, was
a mere Utopia. He believed that the trading and manufac-

xxx EDITOR'S PREFACE.

turing classes would steadily and successfully oppose the eman-
cipation of trade and labour, and that any radical alteration
in the prejudices and laws which prevailed in his time was
not to be expected. Thirty years after Smith's death the
principles of Free Trade were adopted in the Merchants'
Petition. Nearly sixty years after the same event, an energetic
agitation for the utter repudiation of Protectionist principles,
and for the general adoption of a Free Trade policy, was
crowned with success. The persecutors of one generation be-
came preachers to the next.

This reaction is partly to be accounted for by the circum-
stances already alluded to. The trader and manufacturer found
out that the benefits which their predecessors hoped to obtain
by the aid of legislation were delusive as unsatisfactory to
experience as the apples of Sodom. Again, the rapid progress
of mechanical science showed that even had these advantages
not been wholly illusory, they were superfluous. They felt
that the bandages and swathings which might be of some
value in infancy, were needless if not harmful to the strong
man. Besides, if they did no good to the English merchant
and manufacturer, they were intended to do harm to his foreign
rivals. Restrictions on the commercial intercourse of nations
differ in form only from acts of war; and such acts inevitably
provoke retaliation. At last, these men found that the pro-
tection of the home producer was the ruin, or at least the limi-
tation, of the foreign market. England could produce for the
whole world, and, under a vain dread of rivalry, she was shut-
ting herself out from the very market which she could supply.

Smith believed that the agriculturist could be compared for
breadth of view, and clear apprehension of the public good,
most favourably with the mercantile and manufacturing
classes; and that, at least, resistance to economical wisdom
need not be dreaded from that quarter. He was in the wrong,
and he furnishes another proof of how dangerous it is, even
to the most acute and intelligent understanding, to venture
on the function of political prophecy. A set of circumstances,

EDITORS PREFACE.

XXXI

necessarily unforeseen by the great economist, made the land-
lords the most energetic and violent advocates of a protective
system; led to active agitation against their interests; anni-
hilated traditional parties; and produced an economical revo-
lution, which may involve hereafter still more fundamental
changes in public policy.

In so far as the prosperity of society depends upon the
success of agriculture, no period of economical history in England
was perhaps more steadily progressive than the first sixty
years of the eighteenth century. From the evidence supplied
by the hearth-tax, it appears that the population of England
and Wales at the conclusion of the seventeenth century did
not much exceed five millions. From evidence quite as trust-
worthy, it appears that at the accession of George III this
number was nearly doubled. Simultaneously with this growth
of population, occurred an enormous increase of rents. At
the commencement of this epoch, a landed estate of ten thou-
sand a year was a prodigy; at its conclusion, it was common
enough. But withal so plentiful were the seasons, and so
rapidly did the art of agriculture make progress, that England
exported considerable quantities of corn, despite the great'
growth of the population. That corn was exceedingly cheap,,
may be easily seen, if the reader turns to the Table of Com
Prices given at the conclusion of the First Book. It may be
observed, too, that facts, of this kind appear far more plainly
to us than they could have appeared to Smith, writing as he
did in immediate proximity to them, and supplied as he was
with far less correct statistics than those which come before
tho^modern economist.

During the last thirty years of the eighteenth century these
circumstances were totally changed. There is again reason to
believe that the increase of population was arrested. Prices
rose, and, at least while" this country was at war with nearly
the whole civilised world, the nation well nigh suffered the
horrors of famine. During the whole of that war, the country
seemed to be passing through one of those cycles of scanty

xxxii EDITOR'S PREFACE.

crops which appear to occur in some undefined but mysterious
fashion. With this great rise in the price of food, came an
unnatural inflation of rents. For intelligible reasons, that profit
of high prices, which the farmer enjoyed at first, he was con-
strained to share with the landlord, and thus a particular
class, engaged in supplying the necessaries of life, throve on
the misery of the people, and in course of time came to think
it had a right to thrive on this misery.

If the land of a country were, like its capital, capable of
indefinite extension, no rent could arise for anything save that
which has been invested in the soil, or for such advantages
as arise from proximity to a market. But in fully-settled
countries, no addition can be made to their area, and thus,
as long as agriculture progresses, rents advance. The intelli-
gence of the agriculturist and the necessities of the people are
equally gainful to the owner of the soil. Hence, under cir-
cumstances like those alluded to above, where the home supply
is scanty and foreign supply is arrested, there is no limit,
except the power of the people to purchase, to the exactions
of the landowner. All the landowners, could they act in
concert, might do as a man could who, in a besieged city,
possessed all the corn on which the people could depend for
existence. Now the landowners could not of course act in
concert, but they could do the next thing to this they could
induce the Legislature to act for them, by fixing the price at
which the deficiency of the home market could be supplied
from foreign sources. This policy, too, had an indirect effect
on the foreign producer. It discouraged him from attempting
to supply a market, entrance into which was so uncertain.

It would be odious and unjust to say that the landlords
wished to gather their gains from the misery of the people.
But from habit men do that which is unjust and immoral
without suspecting the character of their actions and their
policy. The worst cause may be defended with honest inten-
tions, or excused on the plea of overruling necessity. In the
palmy days of the Corn Law, men admitted, even while they

EDITORS PREFACE. xxxiii

angrily vindicated the law which was then existing, that in
the abstract the natural justice of Free Trade was incon-
testable. The protective system, they allowed, was artificial,
but it was a compensation for 'peculiar burdens/ as they
alleged; and, more than this, it was a system, the subversion
of which would subvert a host of interests, which might claim
consideration, tolerance, and even support, on grounds of pre-
scription. But at last the Corn Laws broke down, partly by
the vigorous reasonings and active exertions of those who
attacked them, much more by the conscientious conversion
of a statesman, whose previous theories gave way under the
pressure of a terrible famine.

During the existence of these laws, however, two circumstances
perpetually occurred, the interpretation of which tended greatly
to shake the faith of many among those who had persistently
advocated their maintenance. It was found that there was the
greatest distress among agriculturists when the rest of the
country was prosperous. The rent of the farmer had been based
on the assumption of high prices ; to him, then, plenty was ruin.
Gradually, therefore, it appeared to many that a system must be
something worse than artificial which makes the beneficence ol
Nature a mischief to the person on which that beneficence is
immediately bestowed.

Next it was found out, that though the farmer profited by a
high price of wheat, he suffered from these high prices, by the fact
that his sheep and cattle, and similar produce, fell greatly in
value during this contingency. Could he indeed have anticipated
the scarcity of one season and the plenty of another, he might have
attempted to provide against the risks of his calling ; but this
was, of course, impossible. Plenty and dearness were therefore
inconvenient to him, though not in the same degree, the larger
benefit, as far as he was concerned, accruing when the nation was
suffering from scarcity. At last the laws fell, and the effect has
been, that the prosperity of the nation has grown rapidly, the
rent of land having fully participated in the general increase.

The last relics of the mercantile system, in so far as the efforts
VOL. i. c

xxxiv EDITORS PREFACE.

of this system were directed towards favouring the accumulations
of the precious metals, were swept away at the resumption of
cash payments in 1819. Up to this period it was lawful to
export foreign gold coin, and bullion the produce of foreign
gold, but not British coin or bullion the produce of British
coin. But the restriction had long ceased to be operative
before this abrogation. It has been found impossible to pre-
vent smuggling, even when the article is bulky, provided the
act of smuggling does not appear to be a plain breach of moral
obligation, but merely resistance to a law dictated by caprice or
selfishness. It was therefore still less possible to prevent the
secret exportation of gold coin. It was notorious that the
military chests of Napoleon were supplied by the act and at the
risk of British bullion dealers. Besides, people were found to
swear, at a very small premium, that the gold for which a legal
exportation was sought was not the produce of British coin.
. A The range of the subjects treated in Smith's work is very wide.
Social history and the politics of commerce occupy his attention
as much as mere abstract reasonings. , His educational theories
have been generally accepted, feis rules of taxation are classical.
His vindication of free trade is complete.'' His criticism of the
Great Company has been the basis of the latest legislation on
the Indian Empire. \- His conception of the mutual relations in
which nations stand, is as comprehensive as it is generous. It
should not be forgotten that Smith did not propose to himself
the discovery of a scheme which should make any one country
wealthy or prosperous at the expense of the rest of mankind,
but how the wealth of nations should be developed. He rose far
above the peddling maxim, that the gain of one people is the
loss of another. Hence his work is international, and has formed
an effective protest against those shams of a sordid self-interest,
which masks itself under the name of Patriotism.
lt , Among economists, Smith possesses the inductive mind in the
highest degree. His work not only displays a wealth of varied
reading, but is full of facts. Considering, too, how inexact were
the statistical data on which he could in his time rely, his

EDITORS PREFACE. xxxv

sagacity is remarkable. No example of this quality seems to
me more striking than his inference that the precarious occu-
pants in the ancient manor must have passed through a mdtayer
tenancy before they reached the independence of the fifteenth-
century yeoman, as described by Fortescue. Such was actually
the fact, as I have been able to discover from a very large in-
vestigation of farm accounts during the epoch referred to by
Smith. But, in fact, to be scientific, Political Economy must be
constantly inductive. Half, and more than half, of the fallacies
into which persons who have handled this subject have fallen, are
the direct outcome of purely abstract speculation. In conse-
quence, though he was the progenitor of the science, and neces-
sarily left it incomplete, Smith is far more frequently in the
right than his critics are. Almost every blemish in his work
(some few inaccuracies of expression excepted, which arise from
a somewhat loose use of terms,) is due to his exaggerated sym-
pathy with the economical theories of his French friends and
teachers. It is to this influence that we can trace his errors as
to the nature and causes of value, and whatever is defective in
his exposition of rent. Even here, however, he seems to me
to be much more in the right than Ricardo, who accounts for the
origin of rent on grounds which have absolutely no warrant in
fact. His most adverse critics have, however, united with his
warmest admirers in his vindication of private liberty against
the interference of Government; that is, in his advocacy of what
are called Free Trade principles.

To the modern reader, who recognises the vast services which
the merchants and manufacturers of Great Britain have done
for such principles as Smith advocated, the language which the
author uses about the mercantile classes seems singularly harsh
and bitter. 'The passionate confidence of interested falsehood;'
the policy of a ' great empire ' being guided by the policy of
' shop-keepers ; ' ' impertinent badges of slavery, imposed by the
groundless jealousy of merchants and manufacturers;' c illiberal
and oppressive monopolies ; ' ' the mean and malignant expedients
of the mercantile system,' and similarly pungent comments on the

c 3

xxxvi EDITOR'S PREFACE.

machinations of the trading classes a century ago, are expressions
of active animosity against interests, which Smith must have
thought hostile to the public good.

But, at that time, the leading merchants deserved little sym-
pathy from any person who considered this public good as the
paramount object of economy and legislation. Their intrigues
had prevented the establishment of bonded warehouses. The
mercantile classes drove Walpole into the war of the Right of
Search. The real or reputed interests of the same order precipi-
tated and prolonged the Seven Years' War. The cost of that
war, and' the sustentation of the East India Company, whose
conquests had made it bankrupt, led to the uprising of the
American colonists, and the War of Independence. The mer-
chants who stimulated, and the Nabobs and Planters who con-
tinued these costly struggles, were no doubt powerful in Change
Alley. They were, moreover, ready to make the highest biddings
for rotten boroughs. But they were detested by the people, and
especially by those freeholders in whom, as Smith thought, the
strength and hope of the nation resided. Macaulay has given, in
a few words, a statement of how public opinion estimated these
people in his Life of Lord Clive, the greatest of the race.

The most energetic attack, however, which Smith made on
any institution of his time, was that on the East India Company-
To us, the Company is a thing of the past. In Smith's day it
was the most brilliant phenomenon that the world had ever
witnessed. A very few years had created the Indian Empire ;
and changed a few timid and servile traders into a force of
heroes, by whom successes had been achieved more amazing than
those of Cortes and Pizarro. In the face of this extraordinary
prestige, which affected the whole Western world, the author of
the c Wealth of Nations ' dissected the pretensions of the great
Company, showed that it failed as a trader, and failed as a ruler ;
and proved that its government was mischievous to its subjects,
and its monopoly a wrong upon the English people.

After the third edition of 1784 Smith made no alteration in
the text of his work Such a course was not, we may suppose,

EDITOR'S PREFACE. xxxvii

adopted because his book needed no revision. It is said that he
made several changes in his 'Theory of Moral Sentiments* in
the year before his death. It seems more probable, as he had
concluded his work with a discussion of the means by which
a restoration of the union between Great Britain and her
American colonies would be best effected, that he was disinclined
to revise his theory after the theory was made impracticable by
a final severance, and by a formal acknowledgment of American
independence. It is to be regretted, indeed, that he did not
comment on the support which the acknowledgment of
American independence gave to his refutation of the colonial
system, and point to the practicability of negotiating a com-
mercial treaty on other principles than those of the mercantile
theory.

It remains that I should add a few words about the part which
I have taken in putting forth this edition of the ' Wealth of
Nations.' It was natural that the Delegates of the Clarendon
Press, who have already done so much service in publishing
important books, should print a new edition of the chief work of
one of the most distinguished persons who have proceeded from
this University, and whose volumes have been the text-book for
the ablest and the best of our statesmen.

The text is that of the last edition which was printed in
Smith's life-time. After the third edition, Smith made no altera-
tion in the text, beyond expressing in an ' Advertisement' to the
fourth edition his obligations to Mr. Hope of Amsterdam, for the
digression on Banks of Deposit. This edition of 1786 is very
carefully printed. I have found only one important typographical
error in the three volumes.

Of course I have faithfully reprinted from this copy. Where
the form of spelling has been changed, I have modernised the
original ; for example, c public ' is printed in this edition without
a final letter, which a century ago was universally appended.
So, again, certain foreign names were occasionally misspelt in the
original, and are corrected in the present edition.

As is stated above, Smith put very few notes to his work.

xxxviii EDITOR'S PREFACE.

Some of these, either because they were quoted from memory,
or because the note was incorrectly printed and escaped cor-
rection, required verification. But in the great majority of
cases, the quotation or reference is given without a foot-note.
As yet, I believe no editor of the ' Wealth of Nations ' has been
at the pains to discover the authorities given in the text. I have
attempted to supply this deficiency; though, in some cases, I
have been unable to detect the original.

The two principal English editions of Smith's work, are those
of Mr. Gibbon Wakefield, and Mr. Macculloch. The former of
these is imperfect. It appears that Mr. Wakefield grew weary
of his task, and disappointed his publisher. It is hardly ne-
cessary to say that what is written by Mr. Wakefiold is acute
and valuable.

Mr. Macculloch 5 s edition, the merits of which I shall not
attempt to discuss, is more ambitious. This writer's disser-
tations are nearly as lengthy as the original text. I am,
however, disposed to think that the editor of a great work,
like that of the ' Wealth of Nations,' should submit to the
functions of a clerk, rather than assume those of a partner,
however deferential his language may be towards the author
with whom he associates his name.

The notes which I have subjoined to my author's text are not
very numerous. I repeat that Adam Smith is much more fre-
quently in the right than his critics are ; and I may fortify this
opinion of mine by a statement of the late Mr. Cobden, who said
in the House of Commons, in a debate taken on Juno 3, 1845,
when the peculiar burdens of land were discussed, and the au-
thority of one of these critics was cited, that the critic in
question 'had been a commentator on Adam Smith, and, like
commentators on Shakespeare, had made that dark which was
light before.' There are certain errors in Smith's reasonings,
certain omissions in his facts, on the agreement of all who have
studied his work. These errors I have attempted to point out,
and these omissions, as far as was consistent with the duties of
an editor, to rectify. In the fulfilment of this office, I have not

EDITOR'S PREFACE. xxxix

commented on Smith's political sentiments ; they are part of the
history of political opinion, and as such have their own value,
apart from their particular merits and defects.

The author appended an Index to his work. There is no
reason to think that this Index was Smith's own doing. It is
rather scanty, and deals more fully with the economical reason-
ings contained in the work than with the whole range of topics
discussed and the multitude of facts cited by the author. I have,
therefore, given a new Index, of a more copious and extended
character than that annexed to the fourth edition.

JAMES E. TIIOROLD ROGERS.

OXFORJX Sept. 10, 1869

SECOND EDITION.

IN this, the second edition, I have revised the whole of the
notes and have brought down the statistical or other facts
to the latest information which has been published. I have
also added from my forthcoming volumes on the History of
Agriculture and Prices in England, 1401-1582, the average
prices of wheat during that period. From these averages,
taken in conjunction with Mr. Lloyd's Oxford prices 1582-1829,
and the Board of Trade returns 1830-1879 for the later period,
and with the average wheat prices given in my first two
volumes, 1259-1400, the public 1ms for the first time been
supplied with an unbroken series of wheat prices for 621
years.

I have also appended a table of the prices of wool in recent
times, from which the reader will be able to follow the im-
provement in the wool-producing quality of sheep for a long

period.

JAMES E. THOROLD ROGERS.

OXFOBD, Sept. 10, 1880.

[ AUTHOR'S ]

ADVEBTISEMENT

TO

THE THIED EDITION.

THE first edition oi tne following work was printed in the
end of the year 1775 an< ^ * n the beginning of the year
1776. Through the greater part of the book therefore, when-
ever the present state of things is mentioned, it is to be
understood of the state they were in either about that time,
or at some earlier period during the time I was employed in
writing the book. To the third edition, however, I have made
several additions, particularly to the chapter upon Drawbacks,
and to that upon Bounties; likewise a new chapter, entitled
' The Conclusion of the Mercantile System ; ' and a new article
to the chapter upon the Expenses of the Sovereign. In all
these additions, ' the present state of things ' means always
the state in which they were during the year 1783 and the
beginning of the year 1784.

[ AUTHOR'S ]
ADVERTISEMENT

TO

THE FOURTH E D I T I O N.

IN this fourth edition I have made no alterations of any
kind. I now, however, find myself at liberty to acknow-
ledge my very great obligations to Mr. Henry Hope of
Amsterdam. To that gentleman I owe the most distinct, as
well as liberal information, concerning a very interesting and
important subject, the Dank of Amsterdam, of which no printed
account had ever appeared to me satisfactory, or even intel-
ligible. The name of that gentleman is so well known in
Europe, the information which comes from him must do so
much honour to whoever has been favoured with it, and my
vanity is so much interested in making this acknowledgment,
that I can no longer refuse myself the pleasure of prefixing
this Advertisement to this new edition of my book.

CONTENTS OF VOL. I.

FAKE

EJUTOH'S PREFACE. FIRST EDITION . v

SECOND EDITION ..... xxxix

AUTHOR'S ADVERTISEMENT TO THE THIRD EDITION. . . xl

FOURTH EDITION . . xli

INTRODUCTION AND PLAN OF THE WORK .... i

BOOK I.

Of the Causes of Improvement in the productive Powers of
Labour, and of the Order according to which its Produce
is naturally distributed among the Banks of the People.

CHAPTER I.
Of the Division of Labour ........ 5

CHAPTER II.
Of the Principle which gives occasion to the Division of Labour , 14

xliv CONTENTS.

CHAPTEE III.

PA(i K

That the Division of Labour is limited by the Extent of the

Market .18

CHAPTEE IV.

Of the Origin and Use of Money 23

CHAPTER V.

r
Of the real and nominal Price of Commodities, or of their Price in

Labour and their Price in Money ..... 30

CHAPTER YI.

Of the component Parts of the Price of Commodities . . . 49

CHAPTER VII.
Of tLe natural and nuirkefc Price of Commodities . . . -57

CHAPTER Yin.
Of the Wages of Labour f>7

CHAPTER IX.
Of the Profits of Stock 92

CHAPTER X.

Of Wages and Profit in the different Employments of Labour and

Stock 103

PART I. Inequalities arising from the Nature of the

Employments themselves 104

PART II. Inequalities occasioned by the Policy of Europe 124

CONTENTS. xlv

CHAPTER XL

PAGE

Of the Rent of Land . . . . . . . . .151

PART I. Of the Produce of Land which always affords

Rent 155

PART II. Of the Produce of Land which sometimes does

and sometimes does not afford Rent . . . 171

PART III. Of the Variations in the Proportion between
the respective Values of that sort of Produce which
always affords Rent, and of that which sometimes does
and sometimes does not afford Rent . . . .185

Digression concerning the Variations in the Value of Silver during
the coiuve of the four last Centuries.

First Period ^

Second Period , . . . . . . .202

Third Period ......... 204

Variations in the Proportion between the respective Values

of Gold and Silver . . . . . . .221

Grounds of the suspicion that the Value of Silver still

continues to decrease . . . . . .226

Different Effects of the Progress of Improvement upon

three different Sorts of rude Produce . . .227

First Sort 228

Second Sort . . . . . . . . .230

Third Sort 240

Conclusion of the Digression concerning the Variations in

the Value of Silver . . . . . . .250

Effects of the Progress of Improvement upon the real Price

of Manufactures . . . . . . .256

Conclusion of the Chapter 261

xlvi CONTENTS.

BOOK II.

Of the Nature, Accumulation, and Employment of Stock.

PACK

INTKODUCTION 273

CHAPTER I.
Of the Division of Stock . . . . . . . 275

r

CHAPTER II.

Of Money considered as a particular Branch of the general Stock
of the Society, or of the Expense of maintaining the National
Capital . . . . . . . . . -283

CHAPTER III.

Of the Accumulation of Capital, or of productive and unproductive

Lahour . . . . . . . . . .332

CHAPTER IV.

Of Stock lent at Interest . . . . . . -353

CHAPTER V.
Of the different Employment of Capitals ..... 362

BOOK III

Of the different Progress of Opulence in different Nations.

CHAPTER I.
Of the natural Progress of Opulence 381

CONTENTS. xlvii

CHAPTER II.

PAGE

Of the .Discouragement of Agriculture in the ancient State of

Europe after the Fall of the Roman Empire . . . .386

CHAPTER III.

Of the Rise and Progress of Cities and Towns, after the Fall of the

Roman Empire ......... 398

CHAPTER IV.

How the Commerce of the Towns contributed to thu Improvement

of the Country . . . . . . . . ^10

AN INQUIRY

INTO

THE NATURE AND CAUSES

OF THE

WEALTH 1 OF NATIONS.

INTRODUCTION AND PLAN OF THE WORK.

THE annual labour of every nation is the fund 2 which originally
supplies it with all the necessaries and conveniences of life
which it annually consumes, and which consist always either in
the immediate produce of that labour, or in what is purchased
with that produce from other nations.

According therefore as this produce, or what is purchased with
it, bears a greater or smaller proportion to the number of those
who are to consume it, the nation will be better or worse sup-
plied with all the necessaries and conveniences for which it has
occasion.

But this proportion must in every nation be regulated by two
different circumstances : first, by the skill, dexterity, and judgment

1 Smith does not define wealth. Most Smith probably had before him the

economists limit it to such material enumeration of Turgot :

objects as have been appropriated by ' La totality des richesses d'une nation

labour, are in demand, and are subject I. La somme dea capitaux employe's

to exchange. But labour, representing a toutes les entreprises de culture d'in-

as it does capital invested in man, is as dustrie et de commerce, et qui n'en

much wealth as any other material ob- doivent jainais sortir. a. Toutes les

ject. Adam Smith s equivalent expres- avances en toute genre d'entreprise de-

sion, * the annual produce of land and vant sans cesse rentrer aux entrepreneurs,

labour/ is faulty : first, because it puts pour tre sans cesse renverstSes dans

the sources of wealth in place of those Fentreprise. 3 Tons les meubles, vte-

products in which everybody allows that ments, bijoux,' &c. Sur la Formation et

wealth must consist ; and next, because la Distribution des Bichesses, 90.

It omits to consider those accumulations of a Mr. Gibbon Wakeficld rightly ob-

past time, which in all wealthy countries serves that labour is the agent, not the

constitute a large and increasing part of fund, and that the distinction is not

the wealth which a community possesses. merely verbal, but important.

VOL. I. B

2 THE NATURE AND CAUSES OF INTRO-

with which its labour is generally applied ; and, secondly, by the
proportion between the number of those who are employed in
useful labour, and that of those who are not so employed. What-
ever be the soil, climate, or extent of territory of any par-
ticular nation, the abundance or scantiness of its annual supply
must, in that particular situation, depend upon those two cir-
cumstances \

The abundance or scantiness of this supply too seems to depend
more upon the former of those two circumstances than upon the
latter. Among* the savage nations of hunters and fishers, every
individual who is able to work is more or less employed in useful
labour, and endeavours to provide, as well as he can, the necessaries
and conveniences of life, for himself, or such of his family or tribe
as are either too old, or too young, or too infirm to go a hunting
and fishing. Such nations, however, are so miserably poor, that,
from mere want, they are frequently reduced, or at least think
themselves reduced, to the necessity sometimes of directly destroy-
ing, and sometimes of abandoning their infants, their old people,
and those afflicted with lingering diseases, to perish with hunger
or to be devoured by wild beasts. Among civilised and thriving
nations, on the contrary, though a great number of people do not
labour at all, many of whom consume the produce of ten times,
frequently of a hundred times more labour than the greater part
of those who work ; yet the produce of the whole labour of the
society is so great, that all are often abundantly supplied, and a
workman, even of the lowest and poorest order, if he is frugal and
industrious, may enjoy a greater share of the necessaries and con-
veniences of life than it is possible for any savage to acquire.

The causes of this improvement in the productive powers of
labour, and the order according to which its produce is naturally
distributed among the different ranks and conditions of men in the
society, make the subject of the First Book of this Inquiry.

Whatever be the actual state of the skill, dexterity, and judgment
with which labour is applied in any nation, the abundance or
scantiness of its annual supply must depend, during the continuance

1 The number of persons who can be land was engaged in agriculture ; at

maintained in any country depends on present (1880) the food of tljree-fifths

the economy with which the necessaries is probably supplied by the labour of

of life can be procured. Five centuries one-seventh,
ago, nearly the whole population of Eng-

DTJCTION. THE WEALTH OF NATIONS. 3

of that state, upon the proportion between the number of those
who are annually employed in useful labour, and that of those
who are not so employed. The number of useful and productive
labourers, it will hereafter appear, is everywhere in proportion to
the quantity of capital stock which is employed in setting them
to work, and to the particular way in which it is so employed.
The Second Book, therefore, treats of the nature of capital stock,
of the manner in which it is gradually accumulated, and of the
different quantities of labour which it puts into motion, according
to the different ways in which it is employed.

Nations tolerably well advanced as to skill, dexterity, and judg-
ment in the application of labour, have followed very different
plans in the general conduct or direction of it; and those plans
have not all been equally favourable to the greatness of its produce.
The policy of some nations has given extraordinary encouragement
to the industry of the country ; that of others to the industry of
towns. Scarce any nation has dealt equally and impartially with
every sort of industry. Since the downfall of the Roman empire,
the policy of Europe has been more favourable to arts, manufac-
tures, and commerce, the industry of towns; than to agriculture,
the industry of the country. The circumstances which seem to
have introduced and established this policy are explained in the
Third Book.

Though those different plans were, perhaps, first introduced by
the private interests and prejudices of particular orders of men,
without any regard to, or foresight of, their consequences upon the
general welfare of the society ; yet they have given occasion to
very different theories of political economy ; of which some mag-
nify the importance of that industry which is carried on in towns,
others of that which is carried on in the country. Those theories
have had a considerable influence, not only upon the opinions of
men of learning, but upon the public conduct of princes and sove-
reign states. I have endeavoured, in the Fourth Book, to explain,
as fully and distinctly as I can, those different theories, and the
principal effects which they have produced in different ages and
nations.

To explain in what has consisted the revenue of the great body
of the people, or what has been the nature of those funds which, in
different ages and nations, have supplied their annual consumption,

B 2

4 T&E WEALTH OF NATIONS.

is the object of these Four first Books. The Fifth and last Book
treats of the revenue of the sovereign or commonwealth. In this
Book I have endeavoured to show ; first, what are the necessary
expenses of the sovereign or commonwealth ; which of those ex-
penses ought to be defrayed by the general contribution of the
whole society ; and which of them, by that of some particular part
only, or of some particular members of it : secondly, what are the
different methods in which the whole society may be made to con-
tribute towards defraying the expenses incumbent on the whole
society, and what are the principal advantages and inconveniences
of each of those methods : and, thirdly and lastly, what are the
reasons and causes which have induced almost all modern govern-
ments to mortgage some part of this revenue, or to contract debts,
and what have been the effects of those debts upon the real wealth,
the annual produce of the land and labour of the society.

BOOK I,

OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVE POWERS

OF LABOUR, AND OF THE ORDER ACCORDING TO WHICH

ITS PRODUCE IS NATURALLY DISTRIBUTED AMONG

THE DIFFERENT RANKS OF THE PEOPLE.

CHAPTER I.

OF THE DIVISION OP LABOUR. 1

THE greatest improvement in the productive powers of labour,
and the greater part of the skill, dexterity, and judgment
with which it is anywhere directed or applied, seem to have been
the effect of the division of labour.

The effects of the division of labour, in the general business of
society, will be more easily understood by considering in what
manner it operates in some particular manufactures. It is com-
monly supposed to be carried furthest in some very trifling ones ;
not perhaps that it really is carried further in them than in others
of more importance : but in those trifling manufactures which are
destined to supply the small wants of but a small number of people,
the whole number of workmen must necessarily be small ; and those
employed in every different branch of the work can often be collected
into the same workhouse, and placed at once under the view of the
spectator. In those great manufactures, on the contrary, which are
destined to supply the great wants of the great body of the people,
every different branch of the work employs so great a number of
workmen, that it is impossible to collect them all into the same

1 For ' labour ' Mr. Gibbon Wakefield altogether on combination of labour,

would substitute employment.' He or co-operation.' This co-operation lie

observes that the word labour is used divides into simple and complex. In

ambiguously, and that the title of the the former a number of persons do the

chapter suggests the direct reverse of same work together, in the latter a

that which the author contemplated. number perform ditferent operations,

'The greatest division of labour,' says each of which contributes to a single

the writer, ' takes place among those product. The latter is that which Smith

exceedingly barbarous savages who never illustrates under the term ' division of

help each other, and division of employ- labour.' Wakefield's Smith, vol. i. chap, i.

ments with all its great results depends Note.

6 THE NATURE AND CAUSES OF BOOK i.

workhouse. 1 We can seldom see more, at one time, than those
employed in one single branch. Though in such manufactures,
therefore, the work may really be divided into a much greater
number of parts than in those of a more trifling nature, the division
is not near so obvious, and has accordingly been much less observed.
To take an example, therefore, from a very trifling manufacture,
but one in which the division of labour has been very often taken
notice of, the trade of the pin-maker ; a workman not educated to
this business (which the division of labour has rendered a distinct
trade), nor acquainted with the use of the machinery employed in it
(to the invention of which the same division of labour has probably
given occasion), could scarce, perhaps, with his utmost industry,
make one pin in a day, and certainly could not make twenty. But
in the way in which this business is now carried on, not only the
whole work is a peculiar trade, but it is divided into a number of
branches, of which the greater part are likewise peculiar trades.
One man draws out the wire, another straights it, a third cuts it,
a fourth points it, a fifth grinds it at the top for receiving the
head ; to make the head requires two or three distinct operations ;
to put it on is a peculiar business, to whiten the pins is another ;
it is even a trade by itself to put them into the paper ; and the
important business of making a pin is, in this manner, divided into
about eighteen distinct operations, which in some manufactories are
all performed by distinct hands, though in others the same man will
sometimes perform two or three of them. I have seen a small
manufactory of this kind where ten men only were employed, and
where some of them consequently performed two or three distinct
operations. But though they were very poor, and therefore but
indifferently accommodated with the necessary machinery, they
could, when they exerted themselves, make among them about
twelve pounds of pins in a day. There are in a pound upwards of
four thousand pins of a middling size. Those ten persons, therefore,
could make among them upwards of forty-eight thousand pins in
a day. Each person, therefore, making a tenth part of forty-eight

1 This statement has long ceased to be appear to be twofold, i. Such a system

true of the great industrial undertakings tends to eliminate intermediary agents,

in this country. There is a growing 2. It tends to obviate the risk of losing

tendency towards aggregating the various profit in any one of the co-operative ern-

contributors to a joint product under one ployments, by distributing risk and profit

roof. The motives which lead to this over the whole operation.

CHAP. i. THE WEALTH OF NATIONS. 7

thousand pins, might be considered as making four thousand eight
hundred pins in a day. But if they had all wrought separately and
independently, and without any of them having been educated to this
peculiar business, they certainly could not each of them have made
twenty, perhaps not one pin in a day ; that is, certainly, not the two
hundred and fortieth, perhaps not the four thousand eight hundredth
part of what they are at present capable of performing, in consequence
of a proper division and combination of their different operations.

In every other art and manufacture, the effects of the division of
labour are similar to what they are in this very trifling one ; though
in many of them, the labour can neither be so much subdivided,
nor reduced to so great a simplicity of operation. The division of
labour, however, so far as it can be introduced, occasions, in every
art, a proportionable increase of the productive powers of labour.
The separation of different trades and employments from one
another seems to have taken place in consequence of this ad-
vantage. The separation too is generally carried furthest in those
countries which enjoy the highest degree of industry and improve-
ment ; what is the work of one man in a rude state of society, being
generally that of several in an improved one. In every improved
society, the farmer is generally nothing but a farmer; the manu-
facturer, nothing but a manufacturer. The labour too which is
necessary to produce any one complete manufacture, is almost
always divided among a great number of hands. How many
different trades are employed in each branch of the linen and
woollen manufactures, from the growers of the flax and the wool,
to the bleachers and smoothers of the linen, or to the dyers and
dressers of the cloth ! The nature of agriculture, indeed, does not
admit of so many subdivisions of labour, nor of so complete a
separation of one business from another, as manufactures. It is
impossible to separate so entirely the business of the grazier from
that of the corn-farmer, as the trade of the carpenter is commonly
separated from that of the smith. The spinner is almost always
a distinct person from the weaver; but the ploughman, the
harrower, the sower of the seed, and the reaper of the corn, are
often the same. The occasions for those different sorts of labour
returning with the different seasons of the year, it is impossible that
one man should be constantly employed in any one of them. This
impossibility of making so complete and entire a separation of all

8 THE NATURE AND CAUSES OF BOOK i.

the different branches of labour employed in agriculture, is perhaps
the reason why the improvement of the productive powers of labour
in this art does not always keep pace with their improvement in
manufactures. 1 The most opulent nations, indeed, generally excel
all their neighbours in agriculture as well as in manufactures ; but
they are commonly more distinguished by their superiority in the
latter than in the former. Their lands are in general better
cultivated, and having more labour and expense bestowed upon
them, produce more in proportion to the extent and natural fertility
of the ground. But this superiority of produce is seldom much
more than in proportion to the superiority of labour and expense.
In agriculture, the labour of the rich country is not always much
more productive than that of the poor ; or, at least, it is never so
much more productive, as it commonly is in manufactures. The
corn of the rich country, therefore, will not always, in the same
degree of goodness, come cheaper to market than that of the poor.
The corn of Poland, in the same degree of goodness, is as cheap as
that of France, notwithstanding the superior opulence and improve-
ment of the latter country. The corn of France is, in the corn
provinces, fully as good, and in most years nearly about the same
price with the corn of England, though, in opulence and improve-
ment, France is perhaps inferior to England. The corn-lands of
England, however, are better cultivated than those of France, and
the corn-lands of France are said to be much better cultivated than
those of Poland. But though the poor country, notwithstanding
the inferiority of its cultivation, can, in some measure, rival the
rich in the cheapness and goodness of its corn, it can pretend to no
such competition in its manufactures ; at least if those manufactures
suit the soil, climate, and situation of the rich country. The silks
of France are better and cheaper than those of England, because the
silk manufacture, at least under the present high duties upon the
importation of raw silk, docs not so well suit the climate of England

1 It is one reason, but not the sole must be maintained out of the poor rate,

reason. The motive to improvement in Where land is plentiful, labour scarce,

the process of agriculture has been less and the demand of the foreign market is

energetic than in that of manufacture. considerable, the application of machinery

For, first, the farmer is less able to ap- to agriculture is as fully developed as it

propriate the profit of an improved pro- is to manufacture. Such is the case with

cess, but is constrained sooner to share it the North- Western States of the Ameri-

with the landlord ; next, agricultural can Union,
labour is ordinarily superabundant, and

CHAP. i. THE WEALTH OF NATIONS. 9

as that of France. But the hard-ware and the coarse woollens of
England are beyond all comparison superior to those of France, and
much cheaper too in the same degree of goodness. In Poland there
are said to be scarce any manufactures of any kind, a few of those
coarser household manufactures excepted, without which no country
can well subsist.

This great increase of the quantity of work, which, in consequence
of the division of labour, the same number of people are capable of
performing, is owing to three different circumstances : first, to the
increase of dexterity in every particular workman ; secondly, to the
saving of the time which is commonly lost in passing from one
species of work to another; and lastly, to the invention of a great
number of machines which facilitate and abridge labour, and enable
one man to do the work of many. 1

First, the improvement of the dexterity of the workman neces-
sarily increases the quantity of the work he can perform ; and the
division of labour, by reducing every man's business to some oqe
simple operation, and by making this operation the sole employment
of his life, necessarily increases very much the dexterity of the
workman. A common smith, who, though accustomed to handle
the hammer, has never been used to make nails, if upon some
particular occasion he is obliged to attempt it, will scarce, I am
assured, be able to make above two or three hundred nails in a day,
and those too very bad ones. A smith who has been accustomed to
make nails, but whose sole or principal business has not been that
of a nailer, can seldom with his utmost diligence make more than
eight hundred or a thousand nails in a day. I have seen several boys
under twenty years of age who had never exercised any other trade
but that of making nails, and who, when they exerted themselves,
could make, each of them, upwards of two thousand three hundred
nails in a day. The making of a nail, however, is by no means one
of the simplest operations. The same person blows the bellows,
stirs or mends the fire as there is occasion, heats the iron, and forges

1 Smith has omitted to notice another bestowed by him would have to be paid

important consequence of the process re- at the rate of the highest and hardest,

ferred to in the text. The division of The first English author who appears to

labour makes it possible that the different have called attention to this fact was

agents in the joint product should be re- Mr. Babbage, though he informed the

munerated at different rates ; whereas if Editor that he had subsequently met with

the process were begun and completed by a similar comment on the text of Smith

one man, the commonest or easiest labour in the works of an Italian author.

10 THE NATURE AND CAUSES OF BOOK i.

every part of the nail : in forging the head too he is obliged to
change his tools. The different operations into which the making
of a pin, or of a metal button, is subdivided, are all of them much
more simple, and the dexterity of the person, of whose life it has
been the sole business to perform them, is usually much greater.
The rapidity with which some of the operations of those manu-
factures are performed, exceeds what the human hand could, by
those who had never seen them, be supposed capable of acquiring.

Secondly, the advantage which is gained by saving the time
commonly lost in passing from one sort of work to another, is much
greater than we should at first view be apt to imagine it. It is
impossible to pass very quickly from one kind of work to another,
that is carried on in a different place, and with quite different tools.
A country weaver, who cultivates a small farm, must lose a good
deal of time in passing from his loom to the field, and from the field
to his loom. When the two trades can be carried on in the same
workhouse, the loss of time is no doubt much less. It is even in
this case, however, very considerable. A man commonly saunters
a little in turning his hand from one sort of employment to another.
When he first begins the new work he is seldom very keen and
hearty; his mind, as they say, does not go to it, and for some
time he rather trifles than applies to good purpose. The habit of
sauntering and of indolent careless application, which is naturally,
or rather necessarily, acquired by every country workman who is
obliged to change his work and his tools every half horn*, and to
apply his hand in twenty different ways almost every day of his
life, renders him almost always slothful and lazy, and incapable of
any vigorous application even on the most pressing occasions. In-
dependent, therefore, of his deficiency in point of dexterity, this
cause alone must always reduce considerably the quantity of work
which he is capable of performing. 1

Thirdly, and lastly, everybody must be sensible how much labour
is facilitated and abridged by the application of proper machinery.
It is unnecessary to give any example. I shall only observe, there-
fore, that the invention of all those machines by which labour is so
much facilitated and abridged, seems to have been originally owing

1 Mr. Mill (Book I. chap. viii. 5) advantages which ensue from continuity
criticises the whole of this passage, and of labour in one occupation,
holds that Smith has exaggerated the

CHAP. i. THE WEALTH OF NATIONS. 11

to the division of labour. Men are much more likely to discover
easier and readier methods of attaining any object, when the whole
attention of their minds is directed towards that single object, than
when it is dissipated among a great variety of things. But in
consequence of the division of labour, the whole of every man's
attention comes naturally to be directed towards some one very
simple object. It is naturally to be expected, therefore, that some
one or other of those who are employed in each particular branch of
labour should soon find out easier and readier methods of performing
their own particular work, wherever the nature of it admits of such
improvement. A great part of the machines made use of in those
manufactures in which labour is most subdivided, were originally
the inventions of common workmen, who, being each of them
employed in some very simple operation, naturally turned their
thoughts towards finding out easier and readier methods of per-
forming it. Whoever has been much accustomed to visit such
manufactures, must frequently have been shown very pretty ma-
chines, which were the inventions of such workmen, in order to
facilitate and quicken their own particular part of the work. In
the first fire-engines, a boy was constantly employed to open and
shut alternately the communication between the boiler and the
cylinder, according as the piston either ascended or descended.
One of those boys, who loved to play with his companions, ob-
served that, by tying a string from the handle of the valve which
opened this communication to another part of the machine, the
valve would open and shut without his assistance, and leave him
at liberty to divert himself with his play-fellows. One of the
greatest improvements that has been made upon this machine, since
it was first invented, was in this manner the discovery of a boy who
wanted to save his own labour. 1

All the improvements in machinery, however, have by no means
been the inventions of those who had occasion to use the machines.
Many improvements have been made by the ingenuity of the
makers of the machines, when to make them became the business
of a peculiar trade ; and some by that of those who are called
philosophers or men of speculation, whose trade is not to do any-

1 The desire to get the greatest possible to the invention and improvement of
result, with the least possible expenditure machinery. To diminish cost, is to make
of force, is the most powerful stimulant labour most efficient, and increase profit.

12 THE NATURE AND CAUSES OF BOOK t.

thing, but to observe everything ; and who, upon that account, are
often capable of combining together the powers of the most distant
and dissimilar objects. In the progress of society, philosophy or
speculation becomes, like every other employment, the principal or
sole trade and occupation of a particular class of citizens. Like
every other employment too, it is subdivided into a great number
of different branches, each of which affords occupation to a peculiar
tribe or class of philosophers ; and this subdivision of employment
in philosophy, as well as in every other business, improves dexterity,
and saves time. Each individual becomes more expert in his own
peculiar branch, more work is done upon the whole, and the quantity
of science is considerably increased by it.

It is the great multiplication of the productions of all the different
arts, in consequence of the division of labour, which occasions, in a
well-governed society, that universal opulence which extends itself
to the lowest ranks of the people. Every workman has a great
quantity of his own work to dispose of beyond what he -himself has
occasion for ; and every other workman being exactly in the same
situation, he is enabled to exchange a great quantity of his own
goods for a great quantity, or, what comes to the same thing, for
the price of a great quantity of theirs. He supplies them abundantly
with what they have occasion for, and they accommodate him as
amply with what he has occasion for, and a general plenty diffuses
itself through all the different ranks of the society.

Observe the accommodation of the most common artificer or day-
labourer in a civilised and thriving country, and you will perceive
that the number of people of whose industry a part, though but a
small part, has been employed in procuring him this accommodation
exceeds all computation. The woollen coat, for example, which
covers the day-labourer, as coarse and rough as it may appear, is
the produce of the joint labour of a great multitude of workmen.
The shepherd, the sorter of the wool, the wool-comber or carder, the
dyer, the scribbler, the spinner, the weaver, the fuller, the dresser,
with many others, must all join their different arts in order to
complete even this homely production. How many merchants and
carriers, besides, must have been employed in transporting the
materials from some of those workmen to others who often live
in a very distant part of the country 1 how much commerce and
navigation in particular, how many ship-builders, sailors, sail-

CHAP. j. THE WEALTH OF NATIONS. 13

makers, rope-maters, must Lave been employed in order to bring
together the different drugs made use of by the dyer, which often
come from the remotest corners of the world ! What a variety of
labour too is necessary in order to produce the tools of the meanest
of those workmen ! To say nothing of such complicated machines
as the ship of the sailor, the mill of the fuller, or even the loom of
the weaver, let us consider only what a variety of labour is requisite
in order to form that very simple machine, the shears with which
the shepherd clips the wool. The miner, the builder of the furnace
for smelting the ore, the feller of the timber, the burner of the
charcoal to be made use of in the smclting-house, the brickmaker,
the bricklayer, the workmen who attend the furnace, the mill-
wright, the forger, the smith, must all of them join their different
arts in order to produce them. Were we to examine, in the same
manner, all the different parts of his dress and household furniture,
the coarse linen shirt which he wears next his skin, the shoes which
cover his feet, the bed which he lies on, and all the different parts
which compose it, the kitchen-grate at which he prepares his
victuals, the coals which he makes use of for that purpose, dug
from the bowels of the earth, and brought to him perhaps by a
long sea and a long land carriage, all the other utensils of his
kitchen, all the furniture of his table, the knives and forks, the
earthen or pewter plates upon which he serves up and divides his
victuals, the different hands employed in preparing his bread and
his beer, the glass window which lets in the heat and the light
and keeps out the wind and the rain, with all the knowledge and
art requisite for preparing that beautiful and happy invention,
without which these northern parts of the world could scarce have
afforded a very comfortable habitation, together with the tools of
all the different workmen employed in producing those different
conveniences ; if we examine, I say, all these things, and consider
what a variety of labour is employed about each of them, we shall
be sensible that without the assistance and co-operation of many
thousands, the very meanest person in a civilised country could not
be provided, even according to, what we very falsely imagine, the
easy and simple manner in which he is commonly accommodated.
Compared, indeed, with the more extravagant luxury of the great,
his accommodation must no doubt appear extremely simple and
easy; and yet it may be true, perhaps, that the accommodation of

14 THE NATURE AND CAUSES OF BOOK i,

an European prince does not always so much exceed that of an
industrious and frugal peasant, as the accommodation of the latter
exceeds that of many an African king 1 , the absolute master of the
lives and liberties of ten thousand naked savages. 1

CHAPTER II.

OF THE PRINCIPLE WHICH GIVES OCCASION TO THE DIVISION OF

LABOUR.

THIS division of labour, from which so many advantages are
derived, is not originally the effect of any human wisdom,
which foresees and intends that general opulence to which it gives
occasion. It is the necessary, though very slow and gradual con-
sequence of a certain propensity in human nature which has in
view no such extensive utility ; the propensity to truck, barter, and
exchange one thing for another.

Whether this propensity be one of those original principles in
human nature, of which no further account can be given; or
whether, as seems more probable, it be the necessary consequence
of the faculties of reason and speech, it belongs not to our present
subject to inquire. It is common to all men, and to be found in
no other race of animals, which seem to know neither this nor any
other species of contracts. Two greyhounds, in running down the
same hare, have sometimes the appearance of acting in some sort of
concert. Each turns her towards his companion, or endeavours to
intercept her when his companion turns her towards himself. This,
however, is not the effect of any contract, but of the accidental
concurrence of their passions in the same object at that particular
time. Nobody ever saw a dog make a fair and deliberate exchange
of one bone for another with another dog. Nobody ever saw one
animal by its gestures and natural cries signify to another, This is
mine, that yours ; I am willing to give this for that. When an
animal wants to obtain something either of a man or of another

1 See for a similar illustration Turgot, Sur la Formation et la Distribution des
Bichesses, 3.

CHAP. ii. THE WEALTH OF NATIONS. 15

animal, it has no other means of persuasion but to gain the favour
of those whose service it requires. A puppy fawns upon its dam,
and a spaniel endeavours by a thousand attractions to engage the
attention of its master who is at dinner, when it wants to be fed by
him. Man sometimes uses the same arts with his brethren, and
when he has no other means of engaging them to act according to
his inclinations, endeavours by every servile and fawning attention
to obtain their good-will. He has not time, however, to do this
upon every occasion. In civilized society he stands at all times in
need of the co-operation and assistance of great multitudes, while
his whole life is scarce sufficient to gain the friendship of a few
persons. In almost every other race of animals each individual,
when it is grown up to maturity, is entirely independent, and in
its natural state has occasion for the assistance of no other living
creature. But man has almost constant occasion for the help of
his brethren, and it is in vain for him to expect it from their
benevolence only. He will be more likely to prevail if he can
interest their self-love in his favour, and show them that it is for
their own advantage to do for him what he requires of them. 1
Whoever offers to another a bargain of any kind, proposes to do
this. Give mo that which I want, and you shall have this which
you want, is the meaning of every such offer; and it is in this
manner that we obtain from one another the far greater part of
those good offices which we stand in need of. It is not from the
benevolence of the butcher, the brewer, or the baker, that we
expect our dinner, but from their regard to their own interest. We
address ourselves, not to our humanity, but to their self-love, and
never talk to them of their own necessities but of their advantages.
Nobody but a beggar chooses to depend chiefly upon the benevolence
of his fellow-citizens. Even a beggar does not depend upon it en-
tirely. The charity of well-disposed people, indeed, supplies him
with the whole fund of his subsistence. But though this principle
ultimately provides him with all the necessaries of life which he has
occasion for, it neither does nor can provide him with them as he
has occasion for them. The greater part of his occasional wants

1 In all voluntary contracts, both parties tunately, legislation proceeded on this

gain. For a long time, however, people fallacy, and consequently busied itself

were possessed of the idea, that one with restrictions, prohibitions, compensa-

man's gain is another's loss. Unfor- tions, and the like.

16 THE NATURE AND CAUSES OF BOOK i.

are supplied in the same manner as those of other people, by treaty,
by barter, and by purchase. With the money which one man gives
him he purchases food. The old clothes which another bestows
upon him he exchanges for other old clothes which suit him better,
or for lodging, or for food, or for money, with which he can buy
either food, clothes, or lodging, as he has occasion.

As it is by treaty, by barter, and by purchase, that we obtain
from one another the greater part of those mutual good offices
which we stand in need of, so it is this same trucking disposition
which originally gives occasion to the division of labour. 1 In a
trib$ of hunters or shepherds a particular person makes bows and
arrows, for example, with more readiness and dexterity than any
other. He frequently exchanges them for cattle or for venison
with his companions ; and he finds at last than he can in this
manner get more cattle and venison than if he himself went to
the field to catch them. Prom a regard to his own interest, there-
fore, the making of bows and arrows grows to be his chief business,
and he becomes a sort of armourer. Another excels in making
the frames and covers of their little huts or moveable houses. He
is accustomed to be of use in this way to his neighbours, who
reward him in the same manner with cattle and with venison,
till at last he finds it his interest to dedicate himself entirely
to this employment, and to become a sort of house-carpenter.
In the same manner a third becomes a smith or a brazier, a fourth
a tanner or dresser of hides or skins, the principal part of the
clothing of savages. And thus the certainty of being able to
exchange all that surplus part of the produce of his own laboui',
which is over and above his own consumption, for such parts of
the produce of other men's labour as he may have occasion for,
encourages every man to apply himself to a particular occupation,
and to cultivate and bring to perfection whatever talent or genius
he may possess for that particular species of business.

The difference of natural talents in different men is, in reality,

1 Mr. Wakefield has justly observed, from our necessities. To get part of that

that the division of labour, or as he pre- which others possess, we must offer some-

fers, of employments, has been induced thing of our own in exchange, but the

much more by the extension of human desire to possess, and tho labour needed

wants or desire?, than by the mere dis- to acquire that which may be bartered

position to exchange. Where there is for the object of our desire, must precede

no demand, there can be no reciprocity, the exchange itself,
the desire to exchange being developed

CHAP. ii. THE WEALTH OF NATIONS. 17

much less than we are aware of; and the very different genius
which appears to distinguish men of different professions, when
grown up to maturity, is not upon many occasions so much the
cause as the effect of the division of labour. The difference between
the most dissimilar characters, between a philosopher and a com-
mon street porter, for example, seems to arise not so much from
nature, as from habit, custom, and education. When they came
into the world, and for the first six or eight years of their existence,
they were very much alike, and neither their parents nor play-
fellows could perceive any remarkable difference. About that age,
or soon after, they come to be employed in very different occupa-
tions. The difference of talents comes then to be taken notice of,
and widens by degrees, till at last the vanity of the philosopher
is willing to acknowledge scarce any resemblance. But without
the disposition to truck, barter, and exchange, every man must have
procured to himself every necessary and conveniency of life which
he wanted. All must have had the same duties to perform, and
the same work to do, and there could have been no such difference
of employment as could alone give occasion to any great difference
of talents.

As it is this disposition which forms that difference of talents,
so remarkable among men of different professions, so it is this
same disposition which renders that difference useful. Many tribes
of animals, acknowledged to be all of the same species, derive from
nature a much more remarkable distinction of genius, than what,
antecedent to custom and education, appears to take place among
men. By nature a philosopher is not in genius and disposition
half so different from a street porter, as a mastiff is from a grey-
hound, or a greyhound from a spaniel, or this last from a shepherd's
dog. Those different tribes of animals, however, though all of the
same species, are of scarce any use to one another. The strength
of the mastiff is not, in the least, supported either by the swiftness
of the greyhound, or by the sagacity of the spaniel, or by the
docility of the shepherd's dog. The effects of those different
geniuses and talents, for want of the power or disposition to
barter and exchange, cannot be brought into a common stock, and
do not in the least contribute to the better accommodation and
conveniency of the species. Each animal is still obliged to sup-
port and defend itself, separately and independently, and derives

VOL. i. c

18 THE NATURE AND CAUSES OF BOOK i.

no sort of advantage from that variety of talents with which nature
has distinguished its fellows. Among men, on the contrary, the
most dissimilar geniuses are of use to one another ; the different
produces of their respective talents, hy the general disposition to
truck, barter, and exchange, being brought, as it were, into a
common stock, where every man may purchase whatever part of
the produce of other men's talents he has occasion for.

CHAPTER III.

THAT THE DIVISION O* LABOUR IS LIMITED BY THE EXTENT

OF THE MARKET.

AS it is the power of exchanging that gives occasion to the
division of labour, so the extent of this division must
always be limited by the extent of that power, or, in other words,
by the extent of the market. When the market is very small,
no person can have any encouragement to dedicate himself entirely
to one employment, for want of the power to exchange all that
surplus part of the produce of his own labour, which is over and
above his own consumption, for such parts of the produce of other
men's labour as he has occasion for. 1

There are some sorts of industry, even of the lowest kind, which
can be carried on nowhere but in a great town. A porter, for
example, can find employment and subsistence in no other place.
A village is by much too narrow a sphere for him ; even an ordinary
market town is scarce large enough to afford him constant occupa-
tion. In the lone houses and very small villages which are
scattered about in so desert a country as the Highlands of Scot-
land, every farmer must be butcher, baker, and brewer for his
own family. In such situations we can scarce expect to find even

The increased dexterity the saving field. And thii writer goea on to sav

of time, and the invention of machines, that labour is productive in relation to

winch result from the division of em- the energy of labourers, quite as much

ployments, though the greatert, are not as it is by the extent to which employ,

the only improvements in the productive ments are divided,
powers of labour.' Mr. Gibbon Wake-

CHAP. in. THE WEALTH OF NATIONS. Ifr

a smith, a carpenter, or a mason, within less than twenty miles of
another of the same trade. The scattered families that live at eight
or ten miles distance from the nearest of them, must learn to per-
form themselves a great number of little pieces of work, for which,
in more populous countries, they would call in the assistance of those
workmen. Country workmen are almost everywhere obliged to
apply themselves to all the different branches of industry that have
so much affinity to one another as to be employed about the same
sort of materials. A country carpenter deals in every sort of work
that is made of wood ; a country smith in every sort of work that
is made of iron. The former is not only a carpenter, but a joiner,
a cabinet-maker, and even a carver in wood, as well LS a wheel-
wright, a plough- wright, a cart and waggon maker. The employ-
ments of the latter are still more various. It is impossible there
should be such a trade as even that of a nailer in the remote and
inland parts of the Highlands of Scotland. Such a workman at
the rate of a thousand nails a day, and three hundred working
days in the year, will make three hundred thousand nails in the
year. But in such a situation it would be impossible to dispose
of one thousand, that is, of one day's work in the year.

As by means of water-carriage a more extensive market is opened
to every sort of industry than what land-carriage alone can afford
it, so it is upon the sea-coast, and along the banks of navigable
rivers, that industry of every kind naturally begins to subdivide
and improve itself, and it is frequently not till a long time after
that those improvements extend themselves to the inland parts
of the country. A broad-wheeled waggon, attended by two men
and drawn by eight horses, in about six weeks time carries and
brings back between London and Edinburgh near four ton weight
of goods. In about the same time a ship navigated by six or
eight men, and sailing between the ports of London and Leith,
frequently carries and brings back two hundred ton weight of
goods. Six or eight men, therefore, by the help of water-carriage,
can carry and bring back in the same time the same quantity of
goods between London and Edinburgh as fifty broad- wheeled wag-
gons, attended by a hundred men and drawn by four hundred
horses. Upon two hundred tons of goods, therefore, carried by the
cheapest land-carriage from London to Edinburgh, there must be
charged the maintenance of a hundred men for three weeks, and

c 2

20 THE NATVRE AND CAUSES OF BOOK i.

both the maintenance, and, what is nearly equal to the maintenance,
the wear and tear of four hundred horses as well as of fifty great
waggons. Whereas, upon the same quantity of goods carried by
water, there is to be charged only the maintenance of six or eight
men, and the wear and tear of a ship of two hundred tons burden,
together with the value of the superior risk, or the difference of
the insurance between land and water carriage. Were there no
other communication between those two places, therefore, but by
land-carriage, as no goods could be transported from the one to
the other, except such whose price was very considerable in pro-
portion trf their weight, they could carry on but a small part of
that commerce which at present subsists between them, and con-
sequently could give but a small part of that encouragement
which they at present mutually afford to each other's industry.
There could be little or no commerce of any kind between the
distant parts of the world. What goods could bear the expense
of land-carriage between London and Calcutta ? l Or if there were
any so precious as to be able to support this expense, with what
safety could they be transported through the territories of so many
barbarous nations ? Those two cities, however, at present carry on
a very considerable commerce with each other, and by mutually
affording a market, give a good deal of encouragement to each
other's industry.

Since such, therefore, are the advantages of water-carriage, it
is natural that the first improvements of art and industry should
be made where this conveniency opens the whole world for a
market to the produce of every sort of labour, and that they
should always be much later in extending themselves into the
inland parts of the country. 2 The inland parts of the country
can for a long time have no other market for the greater part
of their goods, but the country which lies round about them and
separates them from the sea coast, and the great navigable rivers.

1 Eastern produce, however, before the when time is no object, the use of a
discovery of the Cape passage was chiefly water-way, even though it be artificial,
conveyed by land. Of course it was very is vastly cheaper than that of any road
costly. See Sannto in the Gesta Dei per on land. The idea which is entertained
Francos; and for the prices of tropical by some Americans, that the railroad
produce, as spices, &c.,the Editor's Agri- across the northern continent will divert
culture and Prices, vol. i. the trade of China and Japan from a

2 Of course the force of this reasoning sea. to a land route, is it seems wholly
is greatly modified by the employment visionary. This anticipation, made in
of railroads and locomotive engines. Still 1869, * s equally probable in 1880.

CHAP. in. THE WEALTH OF NATIONS. 21

The extent of their market, therefore, must for a long time be
in proportion to the riches and populousness of that country, and
consequently their improvement must always be posterior to the
improvement of that country. In our North American colonies
the plantations have constantly followed either the sea-coast or the
banks of the navigable rivers, and have scarce anywhere extended
themselves to any considerable distance from both.

The nations that, according to the best authenticated history,
appear to have been first civilised, were those that, dwelt round
the coast of the Mediterranean sea. That sea, by far the greatest
inlet that is known in the world, having no tides, nor consequently
any waves except such as are caused by the wind only, was, by
the smoothness of its surface, as well as by the multitude of its
islands and the proximity of its neighbouring shores, extremely
favourable to the infant navigation of the world ; when, from their
ignorance of the compass, men were afraid to quit the view of the
coast, and from the imperfection of the art of shipbuilding, to
abandon themselves to the boisterous waves of the ocean. To pass
beyond the Pillars of Hercules, that is, to sail out of the Straits
of Gibraltar, was, in the ancient world, long considered as a most
wonderful and dangerous exploit of navigation. It was late before
even the Phoenicians and Carthaginians, the most skilful navigators
and ship-builders of those old times, attempted it, and they were
for a long time the only nations that did attempt it.

Of all the countries on the coast of the Mediterranean sea,
Egypt seems to have been the first in which either agriculture
or manufactures were cultivated and improved to any considerable
degree. Upper Egypt extends itself nowhere above a few miles
from the Nile, and in Lower Egypt that great river breaks itself
into many different canals, which, with the assistance of a little
art, seem to have afforded a communication by water-carriage,
not only between all the great towns, but between all the con-
siderable villages, and even to many farm-houses in the country ;
nearly in the same manner as the Rhine and the Maese do in
Holland at present. The extent and easiness of this inland navi-
gation was probably one of the principal causes of the early
improvement of Egypt.

The improvements in agriculture and manufactures seem likewise
to have been of very great antiquity in the provinces of Bengal

22 THE NATURE AND CAUSES OF BOOK i.

in the East Indies, and in some of the eastern provinces of China ;
though the great extent of this antiquity is not authenticated by
any histories of whose authority we, in this part of the world, are
well assured. 1 In Bengal the Ganges and several other great rivers
form a great number of navigable canals in the same manner as the
Nile does in Egypt. In the eastern provinces of China too, several
great rivers form, by their different branches, a multitude of canals,
and by communicating with ono another afford an inland navigation
much more extensive than that either of the Nile or the Ganges,
or perhaps than both of them put together. It is remarkable that
neither the ancient Egyptians, nor the Indians, nor the Chinese,
encouraged foreign commerce, but seem all to have derived their
great opulence from this inland navigation.

All the inland parts of Africa, and all that part of Asia which
lies any considerable way north of the Euxine and Caspian seas,
the ancient Scythia, the modern Tartary and Siberia, seem in all
ages of the world to have been in the same barbarous and un-
civilised state in which we find them at present. The sea of
Tartary is the frozen ocean which admits of no navigation, and
though some of the greatest rivers in the world run through that
country, they arc at too great a distance from one another to carry
commerce and communication through the greater part of it.
There are in Africa none of those great inlets, such as the Baltic
and Adriatic seas in Europe, the Mediterranean and Euxine seas
in both Europe and Asia, and the gulfs of Arabia, Persia, India,
Bengal, and Siam, in Asia, to carry maritime commerce into the
interior parts of that great continent : and the great rivers of
Africa are at too great a distance from one another to give occa-
sion to any considerable inland navigation. The commerce besides
which any nation can carry on by means of a river which does
not break itself into any great number of branches or canals, and
which runs into another territory before it reaches the sea, can
never be very considerable ; because it is always in the power of
the nations who possess that other territory to obstruct the com-
munication between the upper country and the sea. The navi-
gation of the Danube is of very little use to the different states

1 The reader is aware that great light scrit scholars. In Smith's time this
has been thrown on the domestic his- language was hardly, if at all, known in
tory of India by the researches of San- Europe.

CHAP. iv. THE WEALTH OF NATIONS. 23

of Bavaria, Austria, and Hungary, in comparison of what it would
be if any of them possessed the whole of its course till it falls into
the Black Sea.

CHAPTER IV.

OF THE ORIGIN AND USE OF MONEY.

WHEN the division of labour has been once thoroughly estab-
lished, it is but a very small part of a man's wants which
the produce of his own labour can supply. He supplies the far
greater part of them by exchanging that surplus part of the
produce of his own labour, which is over and above his own con-
sumption, for such parts of the produce of other men's labour as
he has occasion for. Every man thus lives by exchanging, or
becomes in some measure a merchant, and the society itself giows
to be what is properly a commercial society. 1

But when the division of labour first began to take place, this
power of exchanging must frequently have been very much clogged
and embarrassed in its operations. One man, we shall suppose,
has more of a certain commodity than he himself has occasion for,
while another has less. The former consequently would be glad
to dispose of, and the latter to purchase, a part of this superfluity.
But if this latter should chance to have nothing that the former
stands in need of, no exchange can be made between them. The
butcher has more meat in his shop than he himself can consume,
and the brewer and the baker would each of them be willing to
purchase a part of it. But they have nothing to offer in exchange,
except the different productions of their respective trades, and the
butcher is already provided with all the bread and beer which he

1 * The power of exchanging,' says ing,' however, is matter of degree, and

Wakefield, ' seems to depend on a great consists not only in the supply of facilities,

number of circumstances. Adam Smith but in the removal of obstacles. In our

has noticed only two of them, the facilities time, we are tolerably well informed as

afforded by water-carriage, and the use of to the former, but we cannot anticipate

money.' The fact is, acts of exchange the extent to which ingenuity and science

can and do take place even in the absence may remove the latter,
of these conditions. ' Power of exchang-

24 THE NATURE AND CAUSES OF BOOK i.

has immediate occasion for. No exchange can, in this case, be
made between them. He cannot be their merchant, nor they his
customers ; and they are all of them thus mutually less serviceable
to one another. In order to avoid the inconveniency of such
situations, every prudent man in every period of society, after the
first establishment of the division of labour, must naturally have
endeavoured to manage his affairs in such a manner, as to have
at till times by him, besides the peculiar produce of his own
industry, a certain quantity of some one commodity or other, such
as he imagined few people would be likely to refuse in exchange
for the produce of their industry. 1

Many different commodities, it is probable, were successively
both thought of and employed for this purpose. In the rude ages
of society, cattle are said to have been the common instrument of
commerce ; and, though they must have been a most inconvenient
one, yet in old times we find things were frequently valued according
to the number of cattle which had been given in exchange for them.
The armour of Diomede, says Homer, cost only nine oxen ; but
that of Glaucus cost an hundred oxen. Salt is said to be the
common instrument of commerce and exchanges in Abyssinia ; a
species of shells in some parts of the coast of India ; dried cod at
Newfoundland ; tobacco in Virginia ; sugar in some of our West
India colonies ; hides or dressed leather in some other countries ;
and there is at this day a village in Scotland where it is not
uncommon, I am told, for a workman to carry nails instead of
money to the baker's shop or the alehouse. 5 *

In all countries, however, men seem at last to have been deter-
mined by irresistible reasons to give the preference, for this em-
ployment, to metals above every other commodity. Metals can
not only be kept with as little loss as any other commodity, scarce
anything being less perishable than they are, but they can likewise,
without any loss, be divided into any number of parts, as by fusion
those parts can easily be re-united again ; a quality which no other

1 The same train of reasoning is given Paris rdtisseur, the piece cVInde of the

in Aristotle, Ethic. Nicom. v. 5 : &u trAvra slave dealers, the macute of the native

avfj,&\r]TcL 8c? irws tfrai, S)v iariv faXayfy Mandingo merchants, and the Bank

*E</>' 6 rb v6/j.HT/jLa I\rj\v0c, Kal yivcrai nws money of Holland. It appears from

piffov ir&vra y&p ncrpci, K. T. \. Speke's travels, that pieces of cotton

* Turgot, Sur la Formation et la Dis- cloth form a currency, or at least a

tribution des Richesses, 39, mentions as measure of value, in Central Africa,
ideal standards of value the piece of the

CHAP. iv. THE WEALTH OF NATIONS. 25

/

equally durable commodities possess, and which more than any
other quality renders them fit to be the instruments of commerce
and circulation. 1 The man who wanted to buy salt, for example,
and had nothing but cattle to give in exchange for it, must have
been obliged to buy salt to the value of a whole ox or a whole
sheep at a time. He could seldom buy less than this, because
what he was to give for It could seldom be divided without loss ;
and if he had a mind to buy more, he must, for the same reasons,
have been obliged to buy double or triple the quantity, the value,
to wit, of two or three oxen or of two or three sheep. If, on
the contrary, instead of sheep or oxen, he had metals to give in
exchange for it, he could easily proportion the quantity of the
metal to the precise quantity of the commodity which he had
immediate occasion for.

Different metals have been made use of by different nations for
this purpose. Iron was the common instrument of commerce
among the ancient Spartans ; copper among the ancient Romans ;
and gold and silver among all rich and commercial nations.

Those metals seem originally to have been made use of for this
purpose in rude bars, without any stamp or coinage. Thus we
are told by Pliny,* upon the authority of Timams, an ancient
historian, that, till the time of Servius Tullius, the Romans had
no coined money, but made use of unstamped bars of copper to
purchase whatever they had occasion for. These rude bars, there-
fore, performed at this time the function of money.

The use of metals in this rude state was attended with two very
considerable inconveniences; first, with the trouble of weighing;
and, secondly, with that of assaying them. . In the precious metals,
where a small difference in the quantity makes a great difference
in the value, even the business of weighing, with proper exactness,

requires at least very accurate weights and scales. The weighing

%

1 There are other reasons which have A stream makes little difference to the

lod to the selection of gold and silver. volume of a great lake, though it may

They are obtained in nearly equal quan- itself be changed from a rill into a torrent,

titles by nearly equal labour, and there- See below, Chap. IX.
fore are not in themselves liable to * Plin. Hist. Nat. lib. xxxiii. cap. 13.

sudden fluctuations in value. Besides, ' Servius rex primus signavit aea. Antea

the existing stocks are so large, that rudi usos Romse Timteus tradit. Signatum

any great addition is of no such signi- est nota pecudum, unde et pecunia ap-

ficance as it is in the case of other pellata Argentum signatum est anno

materials, the annual production and Urbis 485, . . quinque aunis ante primuin

consumption of which proceed pari pawn, bellum Punicum.'

26 THE NATURE AND CAUSES OF BOOK i.

of gold in particular is an operation of some nicety. In the coarser
metals, indeed, where a small error would be of little consequence,
less accuracy would, no doubt, be necessary. Yet we should find
it excessively troublesome, if every time a poor man had occasion
either to buy or sell a farthing's worth of goods, he was obliged
to weigh the farthing. The operation of assaying is still more
difficult, still more tedious, and, unless a part of the metal is
fairly melted in the crucible, with proper dissolvents, any con-
clusion that can be drawn from it is extremely uncertain. Before
the institution of coined money, however, unless they went through
this tedious and difficult operation, people must always have been
liable to the grossest frauds and impositions, and instead of a pound
weight of pure silver, or pure copper, might receive in exchange
for their goods an adulterated composition of the coarsest and
cheapest materials, which had however, in their outward appear-
ance, been made to resemble those metals. To prevent such
abuses, to facilitate exchanges, and thereby to encourage all sorts
of industry and commerce, it has been found necessary, in all
countries that have made any considerable advances towards im-
provement, to affix a public stamp upon certain quantities of such
particular metals as were in those countries commonly made use
of to purchase goods. Hence the origin of coined money, and
of those public offices called mints; institutions exactly of the
same nature with those of the aulnagers and stampmasters of
woollen and linen cloth. All of them are equally meant to
ascertain, by means of a public stamp, the quantity and uniform
goodness of those different commodities when brought to market. 1

The first public stands of this kind that were affixed to the
current metals, seem in many cases to have been intended to
ascertain, what it was both most difficult and most important to
ascertain, the goodness or fineness of the metal, and to have
resembled the sterling mark which is at present affixed to plate
and bars of silver, or the Spanish mark which is sometimes affixed
to ingots of gold, and which being struck only upon one side of
the piece, and not covering the whole surface, ascertains the fine-

1 The service which the executive in does riot do more than issue coins of

the state does to the public in certifying a certain weight, and enact that when

the fineness of the metallic currency is they are worn below a certain weight,

far more important than that of its de- they shall be necessarily withdrawn from

termining the weight of the pieces. It circulation.

CHAP. iv. THE WEALTH OF NATIONS. 27

ness, but not the weight of the metal. Abraham weighs to
Ephron the four hundred shekels of silver which he had agreed
to pay for the field of Machpelah. They are said however to be
the current money of the merchant, and yet are received by weight
and not by tale, in the same manner as ingots of gold and bars
of silver are at present. The revenues of the ancient Saxon kings
of England are said to have been paid, not in money but in kind,
that is, in victuals and provisions of all sorts % William the Con-
queror introduced the custom of paying them in money. This
money, however, was, for a long time, received at the exchequer
by weight and not by talc. 1

The inconveniency and difficulty of weighing those metals with
exactness gave occasion to the institution of coins, of which the
stamp, covering entirely both sides of the piece and sometimes the
edges too, was supposed to ascertain not only the fineness, but
the weight of the metal. Such coins, therefore, were received by
tale as at present, without the trouble of weighing.

The denominations of those coins seem originally to have expressed
the weight or quantity of metal contained in them. In the time of
Servius Tullius, who first coined money at Rome, the Roman As or ,
Pondo contained a Roman pound of good copper. It was divided in
the same manner as our Troyes pound, into twelve ounces, each of
which contained a real ounce of good copper. The English pound
sterling, in the time of Edward I, contained a pound, Tower weight,
of silver of a known fineness. The Tower pound seems to have been
something more than the Roman pound, and something less
than the Troyes pound. 2 This last was not introduced into the
mint of England till the i8th of Henry VIII. The French livre
contained in the time of Charlemagne a pound, Troyes weight, of
silver of a known fineness. The fair of Troyes in Champaign was
at that time frequented by all the nations of Europe, and the
weights and measures of so famous a market were generally known
and esteemed. The Scots money pound contained, from the time
of Alexander the First to that of Robert Bru^e, a pound of silver
of the same weight and fineness with the English pound sterling.

1 There is reason to believe, from the a For the distinction between these two
evidence of prices, as well as on other pounds, and for information on the cur-
grounds, that payments were made by rency of the thirteenth and fourteenth
weight up to the time that Elizabeth re- centuries, see the Editor's Agriculture
formed the currency. See also below, and Prices, vol. i. chap, n.
Chap. XI, on the wheat prices.

28 THE NATURE AND CAUSES OF BOOK i.

English, French, and Scots pennies too, contained all of them
originally a real pennyweight of silver, the twentieth part of an
ounce, and the two-hundred-and-fortieth part of a pound. The
shilling too seems originally to have been the denomination of a
weight. When wheat is at twelve shillings the quarter, says an ancient
statute of Henry III, then wastel bread of a farthing shall weigh eleven
shillings and four pence. The proportion, however, between the
shilling and either the penny on the one hand, or the pound on the
other, seems not to have been so constant and uniform as that
between the penny and the pound. During the first race of the
kings of France, the French sou or shilling appears upon different
occasions to have contained five, twelve twenty, and forty pennies.
Among the ancient Saxons a shilling appears at one time to have
contained only five pennies, and it is not improbable that it may have
been as variable among them as among their neighbours, the ancient
Franks. From the time of Charlemagne among the French, and
from that of William the Conqueror among the English, the propor-
tion between the pound, the shilling, and the penny seems to have
been uniformly the same as at present, though the value of each has
been very different. For in every country of the world, I believe,
the avarice and injustice of princes and foreign states, abusing the
confidence of their subjects, have by degrees diminished the real
quantity of metal which had been originally contained in their coins.
The Roman As, in the latter ages of the Republic, was reduced to
the twenty-fourth part of its original value, and, instead of weighing
a pound, came to weigh only half an ounce. The English pound
and penny contain at present about a third only ; the Scots pound
and penny about a thirty-sixth ; and the French pound and penny
about a sixty-sixth part of their original value. By means of those
operations the princes and sovereign states which performed them
were enabled, in appearance, to pay their debts and to fulfil their
engagements with a smaller quantity of silver than would otherwise
have been requisite. It was indeed in appearance only ; for their
creditors were really defrauded of a part of what was due to them.
All other debtors in the state were allowed the same privilege, and
might pay with the same nominal sum of the new and debased coin
whatever they borrowed in the old. Such operations, therefore,
have always proved favourable to the debtor, and ruinous to the
creditor, and have sometimes produced a greater and more universal

CHAP. iv. THE WEALTH OF NATIONS. 29

revolution in the fortunes of private persons, than could have been
occasioned by a very great public calamity. 1

It is in this manner that money has become in all civilised
nations the universal instrument of commerce, by the intervention
of which goods of all kinds are bought and sold, or exchanged for
one another.

What are the rules which men naturally observe in exchanging
them either for money or for one another, I shall now proceed to
examine. These rules determine what may be called the relative or
exchangeable value of goods.

The word VALUE, it is to be observed, has two different meanings,
and sometimes expresses the utility of some particular object, and
sometimes the power of purchasing other goods which the possession
of that object conveys. The one may be called ' value in use ;' the
other c value in exchange. 3 The things which have the greatest
value in use have frequently little or no value in exchange ; and, on
the contrary, those which have the greatest value in exchange have
frequently little or no value in use. Nothing is more useful than
water : but it will purchase scarce anything ; scarce anything can
be had in exchange for it. A diamond, on the contrary, has scarce
any value in use ; but a* very great quantity of other goods may
frequently be had in exchange for it. 2

In order to investigate the principles which regulate the ex-
changeable value of commodities, I shall endeavour to show,

First, what is the real measure of this exchangeable value ; or,
wherein consists the real price of all commodities.

Secondly, what are the different parts of which this real price is
composed or made up.

And, lastly, what are the different circumstances which sometimes

*

1 There is good reason to believe that sense of utility, immediately confounds,

the incessant tampering with the cur- in his illustration of a diamond, the

rency, which was practised by the kings moral use of an object with that of its

of France during the thirteenth and four- value in exchange. The first condition

teenth centuries, had much to do with of value is demand, this existing, the

the political weakness of that kingdom relative value of objects is generally

through the epoch referred to ; and sinii- determined by the cost of producing

larly that the issues of base money by them. Demand however may and does

Henry VIII and the Protector Somerset raise the value of objects above the cost

had equally mischievous effects in England of production. The fact that such an

during the sixteenth century. excess of demand over cost exists, gives

a It has been observed that Adam origin to rent. See the first chapter

Smith, after rightly distinguishing be- of Bicardo's Principles of Political

tween an economical use, and any other Economy, <

30 THE NATURE AND CAUSES OF BOOK i.

raise some or all of these different parts of price above, and some-
times sink them below their natural or ordinary rate ; or, what are
the causes which sometimes hinder the market price, that is, the
actual price of commodities, from coinciding exactly with what may
be called their natural price.

I shall endeavour to explain, as fully and distinctly as I can,
those three subjects in the three following chapters, for which I must
very earnestly entreat both the patience and attention of the reader :
his patience in order to examine a detail which may perhaps in some
places appear unnecessarily tedious ; and his attention in order to
understand wjiat may perhaps, after the fullest explication which
I am capable of giving of it, appear still in some degree obscure.
I am always willing to run some hazard of being tedious in order to
be sure that I am perspicuous ; and after taking the utmost pains
that I can to be perspicuous, some obscurity may still appear to
remain upon a subject in its own nature extremely abstracted.

CHAPTER V..

OF THE REAL AND NOMINAL PRICE OF COMMODITIES, OR OF THEIR
PRICE IN LABOUR AND THEIR PRICE IN MONEY.

EVERY man is rich or poor according to the degree in which
he can afford to enjoy the necessaries, conveniences, and
amusements of human life. But after the division of labour has
once thoroughly taken place, it is but a very small part of these
with which a man's own labour can supply him. The far greater
part of them he must derive from the labour of other people, and he
must be rich or poor according to the quantity of that labour which
he can command, or which he can afford to purchase. The value of
any commodity, therefore, to the person who possesses it, and who
means not to use or consume it himself, but to exchange it for
other commodities, is equal to the quantity of labour which it enables
him to purchase or command. Labour, therefore, is the real measure
of the exchangeable value of all commodities. 1

1 Labour is a cause of value, but not value. For example, the annual value
the sole cause, still less the measure of of an acre of a naturally rich pasture, in

CHAP. v. THE WEALTH OF NATIONS. 31

The real price l of everything, what everything really costs to the
man who wants to acquire it, is the toil and trouble of acquiring
it. 2 What everything is really worth to the man who has acquired
it, and who wants to dispose of it or exchange it for something else,
is the toil and trouble which it can save to himself, and which it can
impose upon other people. What is bought with money or with
goods is purchased by labour as much as what we acquire by the
toil of our own body. That money or those goods indeed save us
this toil. They contain the value of a certain quantity of labour
which we exchange for what is supposed at the time to contain the
value of an equal quantity. Labour was the first price, the original
purchase-money that was paid for all things. It was not by gold
or by silver, 3 but by labour, that all the wealth of the world was
originally purchased ; and its value, to those who possess it and who
want to exchange it for some new productions, is precisely equal to
the quantity of labour which it can enable them to purchase or
command.

Wealth, as Mr. Hobbes says, is power. 4 But the person who
either acquires, or succeeds to a great fortune, does not necessarily
acquire or succeed to any political power, either civil or military.
His fortune may, perhaps, afford him the means of acquiring both,
but the mere possession of that fortune does not necessarily convey
to him either. The power which that possession immediately and
directly conveys to him, is the power of purchasing : a certain com-

a densely peopled country, may be very of wheat, barley, and oats have hardly

high, though not more than a day's changed at all for six centuries. Their

labour has been expended on it year by price varies from year to year, their value

year. ^ It is only when the element of in relation to money has been materially

rent is wholly excluded from the price modified since the period referred to.

at ^ which an object sells, that labour 2 This is a very important position. As

is in any sense a measure of value, and a consequence, the value of foreign goods

even then the expression requires limit- is in no sense determined by the cost of

ation. The labour must be as effective production, or by the labour expended

and intelligent as possible. But with on them, but in so far as labour deter-

one exception, the rent of natural powers mines it, by the cost of that against

and forces, labour is a condition precedent which they are exchanged. Hence it is

of value. ^ possible that the product of a foreign

. l Value is a relative term. Hence country may sell at a lower price in an

there is no [joaitive value, no general rise importing country than it does in the

or general fall in value. Price, on the country which produces it.

other hand, is the proportion in which 8 ' L'argent et Tor sont deux marchan-

any object stands at any given time to dises comme les autres, et moins pre*cieuses

money, varying over ehort intervals que beaucoup d'autres, puisqu'elles ne

according as it is scarce or costly, over sont d'aucun usage pour les veritable*

long intervals according as money itself besoins de la vie.' Turgot, 32.

varies. For example, the relative values * Leviathan, part i. ch. 10.

32 THE NATURE AND CAUSES OF BOOK i.

maud over all the labour, or over all the produce of labour which is
then in the market. His fortune is greater or less, precisely in
proportion to the extent of this power ; or to the quantity either of
other men's labour, or, what is the same thing, of the produce of
other men's labour, which it enables him to purchase or command.
The exchangeable value of everything must always be precisely
equal to the extent of this power which it conveys to its owner.

But though labour be the real measure of the exchangeable value
of all commodities, it is not that by which their value is commonly
estimated. It is often difficult to ascertain the proportion between
two different quantities of labour. The time spent in two different
sorts of work will not always alone determine this proportion. The
different degrees of hardship endured, and of ingenuity exercised,
must likewise be taken into account. There may be more labour in
an hour's hard work than in two hours' easy business; or in an
hour's application to a trade which it cost ten years' labour to learn,
than in a month's industry at an ordinary and obvious employment.
But it is not_easy to find any accurate measure either of hardship
or ingenuity. In exchanging indeed the different productions of
different sorts of labour For one another, some allowance is commonly
made for both. It is adjusted, however, not by any accurate
measure, but by the higgling and bargaining of the market, ac-
cording to that sort of rough equality which, though not exact, is
sufficient for carrying on the business of common life.

Every commodity, besides, is more frequently exchanged for, and
thereby compared with, other commodities than with labour. It is
more natural, therefore, to estimate its exchangeable value by the
quantity of some other commodity than by that of the labour which
it can purchase. The greater part of people too understand better
what is meant by a quantity of a particular commodity, than by
a quantity of labour. The one is a plain palpable object ; the other
an abstract notion, which though it can be made sufficiently intelli-
gible, it is not altogether so natural and obvious.

But when barter ceases, and money has become the common
instrument of commerce, every particular commodity is more
frequently exchanged for money than for any other commodity. 1

1 In the internal exchanges of any one in money, is effected by the barter of
country this will hold good, but the trade commodities, money itself in this case
between two countries, though expressed being only a commodity.

CHAP. v. THE WEALTH OF NATIONS. 33

The butcher seldom carries his beef or his mutton to the baker or
the brewer, in order to exchange them for bread or for beer ; but he
carries them to the market, where he exchanges them for money,
and afterwards exchanges that money for bread and for beer. The
quantity of money which he gets for them regulates too the quantity
of bread and beer which he can afterwards purchase. It is more
natural and obvious to him, therefore, to estimate their value by the
quantity of money, the commodity for which he immediately ex-
changes them, than by that of bread and beer, the commodities for
which he can exchange them only by the intervention of another
commodity; and rather to say that his butcher's meat is worth
threepence or fourpence a pound, than that it is worth three or four
pounds of bread, or three or four quarts of small beer. Hence it
comes to pass, that the exchangeable value of every commodity is
more frequently estimated by the quantity of money, than by the
quantity either of labour or of any other commodity which can be
had in exchange for it.

Gold and silver, however, like every other commodity, vary in
their value, are sometimes cheaper and sometimes dearer, sometimes
of easier and sometimes of more difficult purchase. The quantity
of labour which any particular quantity of them can purchase or
command, or the quantity of other goods which it will exchange
for, depends always upon the fertility or barrenness of the mines
which happen to be known about the time when such exchanges
are made. 1 The discovery of the abundant mines of America,
reduced, in the sixteenth century, the value of gold and silver in
Europe to about a third of what it had been before. As it cost less
labour to bring those metals from the mine to the market, so when
they were brought thither they could purchase or command less
labour; and this revolution in their value, though perhaps the
greatest, is by no means the only one of which history gives some
account. But as a measure of Quantity, such as the natural foot,
fathom, or handful, which is continually varying in its own quan-
tity, can never be an accurate measure of the quantity of other

1 The value of the precious nietals is of the New World pillaged the native

determined generally by the cost of their rulers, and afterwards worked the mines

production. It is reasonable to conclude by the compulsory labour of the natives,

that the fall in the value of these metals To infer from the circumstances of the

was not so much induced by the abimd- sixteenth to those of the nineteenth cen-

ance of the mines and their fertility, as tury would be an error,
by the fact that the Spanish conquerors

VOL. I. D

34 THE NATURE AND CAUSES OF BOOK x.

things ; so a commodity which is itself continually varying in its
own value, can never be an accurate measure of the value of other
commodities. Equal quantities of labour, at all times and places,
may be said to be of equal value to the labourer. In his ordinary
state of health, strength and spirits, in the ordinary degree of his
skill and dexterity, he must always lay down the same portion of
his ease, his liberty, and his happiness. The price which he pays
must always be the same, whatever may be the quantity of goods
which he receives in return for it. Of these, indeed, it may some-
times purchase a greater and sometimes a smaller quantity; but it
is their value which varies, not that of the labour which purchases
them. At all' times and places that is dear which it is difficult to
come at, or which it costs much labour to acquire ; and that cheap
which is to be had easily, or with very little labour. Labour alone,
therefore, never varying in its own value, is alone the ultimate and
real standard by which the value of all commodities can at all
times and places be estimated and compared. 1 It is their real
price ; money is their nominal price only.

But though equal quantities of labour are always of equal value
to the labourer, yet to the person who employs him they appear
sometimes to be of greater and sometimes of smaller value. He
purchases them sometimes with a greater and sometimes with a
smaller quantity of goods, and to him the price of labour seems
to vary likg that of all other things. Tt appears to him dear
in the one case, and cheap in the other. In reality, however,
it is the goods which are cheap in the one case, and dear in
the other.

In this popular sense, therefore, labour, like commodities, may be
said to have a real and nominal price. Its real price may be said
to consist in the quantity of the necessaries and conveniences of life
which are given for it; its nominal price, in the quantity of money.

1 'It cannot be correct to say that "as be the only circumstance which can afford
labour may sometimes purchase a greatt-r, any rule for exchanging them for one
sometimes a smaller quantity of goods, it another, or in other \\ords, that it is
is their value which varies, not that of the comparative quantity of commodities
the labour which purchases them, and which labour will produce that deter-
therefore that labour alone never varying mines their past and present relative
in its own value, is alone," &c., but it value, and not the comparative quanti-
18 correct to say, as Adam Smith had ties of joinmodities which are given to
previously said, that the proportion be- the labourer in exchange for his labour/
tweon the quantities of labour necessary Ricardo, ch. i. p. 12.
for acquiring different objects seems to

CHAP. v. THE WEALTH OF NATIONS. 35

The labourer is rich or poor, is well or ill rewarded, in proportion to
the real, not to the nominal price of his labour.

The distinction between the real and the nominal price of com-
modities and labour is not a matter of mere speculation, but may
sometimes be of considerable use in practice. The same real price
is always of the same value ; but on account of the variations in the
value of gold and silver, the same nominal price is sometimes of
very different values. When a landed estate, therefore, is sold with
a reservation of a perpetual rent, if it is intended that this rent should
always be of the same value, it is of importance to the family in
whose favour it is reserved that it should not consist in a particular
sum of money. Its value would in this case be liable to variations
of two different kinds ; first, to those which arise from the different
quantities of gold and silver which are contained at different times
in coin of the same denomination ; and, secondly, to those which
arise from the different values of equal quantities of gold and silver
at different times.

Princes and sovereign states have frequently fancied that they
had a temporary interest to diminish the quantity of pure metal
contained in their coins ; but they seldom have fancied that they
had any to augment it. The quantity of metal contained in the
coins, I believe of all nations, has, accordingly, been almost con-
tinually diminishing, and hardly ever augmenting. Such varia-
tions therefore tend almost always to diminish the value of a
money rent.

The discovery of the mines of America diminished the value of
gold and silver in Europe. This diminution, it is commonly sup-
posed, though, I apprehend, without any certain proof, is still going
on gradually, and is likely to continue to do so for a long time.
Upon this supposition, therefore, such variations are more likely to
diminish than to augment the value of a money rent, even though
it should be stipulated to be paid, not in such a quantity of coined
money of such a denomination (in so many pounds sterling, for
example), but in so many ounces either of pure silver, or of silver of
a certain standard.

The rents which have been reserved in corn have preserved their
value much better than those which have been reserved in money,
even where the denomination of the coin has not been altered. By
the 1 8th of Elizabeth it was enacted, That a third of the rent of all

D 2

36 THE NATURE AND CAUSES OF BOOK i.

college leases should be reserved in corn, to be paid, either in kind,
or according to the current prices at the nearest public market.
The money arising from this corn rent, though originally but
a third of the whole, is in the present times, according to Dr. Black-
stone, commonly near double of what arises from the other two-
thirds. The old money rents of colleges must, according to this
account, have sunk almost to a fourth part of their ancient value ;
or are worth little more than a fourth part of the corn which they
were formerly worth. But since the reign of Philip and Mary the
denomination of the English coin has undergone little or no altera-
tion, and the same number of pounds, shillings, and pence have
contained very nearly the same quantity of pure silver. This de-
gradation, therefore, in the value of the money rents of col-
leges, has arisen altogether from the degradation in the value of
silver. 1

When the degradation in the value of silver is combined with
the diminution of the quantity of it contained in the coin of the
same denomination, the loss is frequently still greater. In Scotland,
where the denomination of the coin has undergone much greater
alterations than it ever did in England, and in France, where it has
undergone still greater than it ever did in Scotland, some ancient
rents, originally of considerable value, have in this manner been
reduced almost to nothing.

Equal quantities of labour will at distant times be purchased
more nearly with equal quantities of corn, the subsistence of the
labourer, than with equal quantities of gold and silver, or perhaps
of any other commodity. Equal quantities of corn, therefore, will,
at distant times, be more nearly of the same real value, or enable
the possessor to purchase or command more nearly the same quan-
tity of the labour of other people. They will do this, I say, more
nearly than equal quantities of almost any other commodity; for
equal quantities of corn will not do it exactly. The subsistence of
the labourer, or the real price of labour, as I shall endeavour to
show hereafter, is very different upon different occasions: more
liberal in a society advancing to opulence than in one that is stands
ing still; and in one that is standing still than in one that is going

* There is another, and far more power- as the fee farm rents, the change in value

ful cause, viz. the increased rent of land would have been wholly due to the fall

due to a greater efficiency of agriculture. in the price of silver. But the corn rents

iiaa tne corn rents been as permanent were revised from time to time

CHAP v. THE WEALTH OF NATIONS. 37

backwards. 1 Every other commodity, however, will at any parti-
cular time purchase a greater or smaller quantity of labour in pro-
portion to the quantity of subsistence which it can purchase at that
time. A rent therefore reserved in corn is liable only to the ,varia-
tions in the quantity of labour which a certain quantity of com can
purchase. 2 But a rent reserved in any other commodity is' 1 liable,
not only to the variations of the quantity of labour which any par-
ticular quantity of corn can purchase, but to the variations in the
quantity of corn which can be purchased by any particular quantity
of that commodity.

Though the real value of a corn rent, it is to be observed how-
ever, varies much less from century to century than that of a money
rent, it varies much more from year to year. The money price of
labour, as I shall endeavour to show hereafter, does not fluctuate
from year to year with the money price of corn, but seems to be
everywhere accommodated, not to the temporary or occasional, but
to the average or ordinary price of that necessary of life. The
average or ordinary price of corn again is regulated, as I shall like-
wise endeavour to show hereafter, by the value of silver, by the
richness or barrenness of the mines which supply the market with
that metal, or by the quantity of labour which must be employed,
and consequently of corn which must be consumed, in order to bring
any particular quantity of silver from the mine to the market. But
the value of silver, though it sometimes varies greatly from century
to century, seldom varies much from year to year, but frequently
continues the same, or very nearly the same, for half a century or
a century together. The ordinary or average money price of corn,
therefore, may, during so long a period, continue the same or very
nearly the same too, and along with it the money price of labour,
provided, at least, the society continues, in other respects, in the
same or nearly in the same condition. In the meantime the

1 It does not follow that Labour will be 2 A fixed and permanent corn rent

paid better in a society advancing to will be far from representing- a fixed

opulence if the number of labourers com- value. For example : the rent of the

peting for employment increases faster best arable land five hundred years ago

than the capital available for their SUB- was sixpence an acre, and sixpence would

tenauce or employment does. The on an average purchase about three pecks

highest remuneration of labour is ac- of wheat ; but a permanent rent of

corded when profits are high, fertile land three pecks of wheat per acre would bear

plentiful, capital sufficient, and labour at the present day a very small propor-

scarct*, as in the United States and most tiou to the average rent of the best

of the British colonies. arable land.

38 THE NATURE AND CAUSES OF BOOK i.

temporary and occasional price of corn may frequently be double,
one year, of what it had been the year before, or fluctuate, for
example, from five-and-twenty to fifty shillings the quarter. But
when corn is at the latter price, not only the nominal, but the real
value of a corn rent will be double of what it is when at the former,
or will command double the quantity either of labour or of the
greater part of other commodities ; the money price of labour, and
along with it that of most other things, continuing the same during
all these fluctuations.

Labour, therefore, it appears evidently, is the only universal, as
well as the only accurate measure of value, or the only standard by
which we can compare the values of different commodities fit all
times and at all places. We cannot estimate, it is allowed, the real
value of different commodities from century to century by the
quantities of silver which were given for them. We cannot esti-
mate it from year to year by the quantities of corn. By the
quantities of labour we can, with the greatest accuracy, estimate
it both from century to century and from year to year. From
1 century to century, corn is a better measure than silver, because,
from century to century, equal quantities of corn will command the
same quantity of labour more nearly than equal quantities of silver.
Prom year to year, on the contrary, silver is a better measure than
corn, because equal quantities of it will more nearly command the
same quantity of labour.

But though in establishing perpetual rents, or even in letting
very long leases, it may be of use to distinguish between real and
nominal price; it is of none in buying arid selling, the more
common and ordinary transactions of human life.

At the same time and place the real and the nominal price of all
commodities are exactly in proportion to one another. The more or
less money you get for any commodity, in the London market, for
example, the more or less labour it will at that time and place
enable you to purchase or command. At the same time and place,
therefore, money is the exact measure of the real exchangeable value
of all commodities. It is so, however, at the same time and place
only.

Though at distant places, there is no regular proportion between
the real and the money price of commodities, yet the merchant who
carries goods from the one to the other has nothing to consider but

CHAP. v. THE WEALTH. OF NATIONS. 39

their money price, or the difference between the quantity of silver
for which he buys them, and that for which he is likely to sell them.
Half an ounce of silver at Canton in China may command a greater
quantity both of labour and of the necessaries and conveniences
of life than an ounce at London. A commodity, therefore, which
sells for half an ounce of silver at Canton may there be really
dearer, of more real importance to the man who possesses it there,
than a commodity which sells for an ounce at London is to the
man who possesses it at London. If a London merchant, however,
can buy at Canton for half an ounce of silver, a commodity which
he can afterwards sell at London for an ounce, he gains a hundred
per cent, by the bargain, just as much as if an ounce of silver was
at London exactly of the same value as at Canton. It is of no
importance to him that half an ounce of silver at Canton would
have given him the command of more labour and of a greater
quantity of the necessaries and conveniences of life than an ounce
can do at London. An ounce at London will always give him the
command of double the quantity of all these which half an ounce
could have done there, and this is precisely what he wants.

As it is the nominal or money price of goods, therefore, which
finally determines the prudence or imprudence of all purchases of
sales, and thereby regulates almost the whole business of common
life in which price is concerned, we cannot wonder that it should
have been so much more attended to than the real price.

In such a work as this, however, it may sometimes be of use to
compare the different real values of a particular commodity at
different times and places, or the different degrees of power over
the labour of other people which it may, upon different occasions,
have given to those who possessed it. We must in this case
compare, not so much the different quantities of silver for which
it was commonly sold, as the different quantities of labour which
those different quantities of silver could have purchased. But the
current prices of labour at distant times and places can scarce ever
be known with any degree of exactness. 1 Those of corn, though
they have in few places been regularly recorded, are in general
better known and have been more frequently taken notice of by
historians and other writers. We must generally, therefore,

1 See for the prices of labour in the Editor's work on Agriculture and Prices,
thirteenth and fourteenth centuries the vol. i. ch. 15.

40 THE NATURE AND CAUSES OF BOOK i.

content ourselves with them, not as being always exactly in the
same proportion as the current prices of labour, but as being the
nearest approximation which can commonly be had to that pro-
portion. I shall hereafter have occasion to make several com-
parisons of this kind.

In the progress of industry, commercial nations have found it
convenient to coin several different metals into money; gold for
larger payments, silver for purchases of moderate value, and copper
or some other coarse metal for those of still smaller consideration.
They have always, however, considered one of those metals as more
peculiarly th measure of value than any of the other two ; and
this preference seems generally to have been given to the metal
which they happened first to make use of as the instrument of
commerce. Having once begun to use it as their standard, which
they must have done when they had no other money, they have*
generally continued to do so even when the necessity was not the
same. 1

The Romans are said to have had nothing but copper money till
within five years before the first Punic war,* when they first began
to coin silver. Copper, therefore, appears to have continued always
the measure of value in that republic. At Rome all accounts appear
to have been kept, and the value of all estates to have been com-
puted, cither in Asses or in Sestertii. The As .was always the de-
nomination of a copper coin. The word Sestertius signifies two
Asses and a half. Though the Sestertius, therefore, was originally
a silver coin, its value was estimated in copper. At Rome, one who
owed a great deal of money was said to have a great deal of other
people's copper.

The northern nations who established themselves upon the ruins
of the Roman empire, seem to have had silver money from the first
beginning of their settlements, and not to have known either gold
or copper coins for several ages thereafter. There were silver coins
in England in the time of the Saxons ; but there was little gold
coined till the time of Edward III, nor any copper till that of

1 France still possesses a double cur- of 1850, gold was undervalued in France ;

rency, debtors having the option of pay- since that time, silver was undervalued

ing their obligations in gold or silver. in the proportion. See Chevallier's trea-

Of course the effect of this arrangement tise, translated by Cobden. At present

is to expel the undervalued metal from (1880) the relation is again reversed,
circulation. Up to the gold discoveries * Pliny, lib. xxxiii. c. 13.

CHAP. v. THE WEALTH OF NATIONS. 41

James I of Great Britain. In England, therefore, and for the
same reason, I believe, in all other modern nations of Europe, all
accounts are kept, and the value of all goods and of all estates is
generally computed in silver : and when we mean to express the
amount of a person's fortune, we seldom mention the number of
guineas, but the number of pounds sterling which we suppose would
be given for it.

Originally, in all countries, I believe, a legal tender of payment
could be made only in the coin of that metal which was peculiarly
considered as the standard or measure of value. In England, gold
was not considered as a legal tender for a long time after it was
coined into money. The proportion between the values of gold and
silver money was not fixed by any public law or proclamation ; but
was left to be settled by the market. If a debtor offered payment
in gold, the creditor might either reject such payment altogether,
or accept of it at such a valuation of the gold as he and his debtor
could agree upon. Copper is not at present a legal tender, except
in the change of the smaller silver coins. In this state of things
the distinction between the metal which was the standard, and that
which was not the standard, was something more than a nominal
distinction. 1

In process of time, and as people became gradually more familiar
with the use of the different metals in coin, and consequently better
acquainted with the proportion between their respective values, it
has in most countries, I believe, been found convenient to ascertain
this proportion, and to declare by a public law that a guinea, for
example, of such a weight and fineness, should exchange for one-
and-twenty shillings, or be a legal tender for a debt of that amount.
In this state of things, and during the continuance of any one
regulated proportion of this kind, the distinction between the

1 For an elaborate account of the 55. id. the oz. In 1816, sixty-six shillings

various mint regulations in this country, were coined out of a pound Troy of silver,

see Lord Liverpool's Treatise on the instead of, as hitherto, sixty-two. This

Coins of the Realm. In early times, gives the government a seignorage of

and down to 1664, the relative value of 6f per cent, on the coinage. JBut silver

gold and silver was determined by pro- is not a legal tender to a higher sum than

clamation, and till 1717 by ths ordinary forty shillings. These regulations effec-

com petition of the market. In 171?, tually prevent silver from becoming the

the guinea was ordered to exchange for sole currency, as would have been the

21 shillings. Up to 1 7 74, gold and silver case if, from such an over-valuation of

were equally legal tender. At this date silver, gold had been driven out of the

the legal tender in silver by tale was 25, country,
higher sums being payable by weight at

42 THE NATURE AND CAUSES OF BOOK i.

metal which is the standard and that which is not the standard
becomes little more than a nominal distinction.

In consequence of any change, however, in this regulated pro-
portion, this distinction becomes, or at least seems to become,
something more than nominal again. If the regulated value of
a guinea, for example, was either reduced to twenty or raised to
two-and-twenty shillings, all accounts being kept and almost all
obligations for debt being expressed in silver money, the greater
part of payments could in either case be made with the same
quantity of silver money as before ; but would require very different
quantities of gold money ; a greater in the one case, and a smaller
in the other. Silver would appear to be more invariable in its
value than gold. Silver would appear to measure the value of gold,
and gold would not appear to measure the value of silver. The
value of gold would seem to depend upon the quantity of silver
which it would exchange for ; and the value of silver would not
seem to depend upon the quantity of gold which it would exchange
for. This difference, however, would be altogether owing to the
custom of keeping accounts, and of expressing the amount of all
great and small sums rather in silver than in gold money. One of
Mr. Drummond's notes for five-and-twenty or fifty guineas would,
after an alteration of this kind, be still payable with five-and-twenty
or fifty guineas in the same manner as before. It would, after
such an alteration, be payable with the same quantity of gold as
before, but with very different quantities of silver. In the payment
of such a note, gold would appear to be more invariable in its value
than silver. Gold would appear to measure the value of silver, and
silver would not appear to measure the value of gold. If the
custom of keeping accounts, and of expressing promissory notes
and other obligations for money in this manner, should ever become
general, gold, and not silver, would be considered as the metal
which was peculiarly the standard or measure of value.

In reality, during the continuance of any one regulated proportion
between the respective values of the different metals in coin, the
value of the most precious metal regulates the value of the whole
coin. 1 Twelve copper pence contain half a pound, avoirdupois, of

1 Adam Smith ascribes more power to does not regulate the value of the whole
mint regulations than they probably pos- coin, but the value of all metals is de-
sess. The value of the most precious metal tennined by the cost of production, or in

CHAP. v. THE WEALTH OF NATIONS. 43

copper, of not the best quality, which, before it is coined, is seldom
worth sevenpence in silver. But as by the regulation twelve such
pence are ordered to exchange for a shilling, they are in the market
considered as worth a shilling, and a shilling can at any time be
had for them. Even before the late reformation of the gold coin of
Great Britain, the gold, that part of it at least which circulated in
London and its neighbourhood, was in general less degraded below
its standard weight than the greater part of the silver. One-and-
twenty worn and defaced shillings, however, were considered as
equivalent to a guinea, which perhaps, indeed, was worn and
defaced too, but seldom so much so. The late regulations have
brought the gold coin as near perhaps to its standard weight as it
is possible to bring the current coin of any nation ; and the order,
to receive no gold at the public offices but by weight, is likely to
preserve it so long as that order is enforced. The silver coin still
continues in the same worn and degraded state as before the re-
formation of the gold coin. In the market, however, one-and-twenty
shillings of this degraded silver coin are still considered as worth
a guinea of this excellent gold coin.

The reformation of the gold coin has evidently raised the value
of the silver coin which can be exchanged for it.

In the English mint a pound weight of gold is coined into
forty-four guineas and a half, which, at one-and-twenty shillings
the guinea, is equal to forty-six pounds fourteen shillings and six-
pence. An ounce of such gold eoin, therefore, is worth $ 17$. io^/.
in silver. In England no duty or seignorage is paid upon the
coinage, and he who carries a pound weight or an ounce weight of
standard gold bullion to the mint, gets back a pound weight or an
ounce weight of gold in coin, without any deduction. Three pounds
seventeen shillings and tenpence halfpenny an ounce, therefore, is
said to be the mint price of gold in England, or the quantity of gold
coin which the mint gives in return for standard gold bullion.

Before the reformation of the gold coin, the price of standard gold
bullion in the market had for many years been up wards of $ 18$.,

case they are procured by exchange, by of two alternatives, they will pay in the

the cost of acquisition. The regulations cheapest, and if the government under-

of the mint can produce one effect only, values any metal, it becomes the dearest,

that of preventing the use of any one at least, if the country be affected by

metal by undervaluing it. Of course foreign trade.
when debtors are allowed to pay in one

44 THE NATURE AND CAUSES OF BOOK i.

sometimes ^3 19$. and very frequently ^4 an ounce ; that sum, it
is probable, in the worn and degraded gold coin, seldom containing
more than an ounce of standard gold. Since the reformation of the
gold coin, the market price of standard gold bullion seldom exceeds
^3 J 7*- 7^- an ounce. Before the reformation of the gold coin,
the market price "was always more or less above the mint price.
Since that reformation, the market price has been constantly below
the mint price. But that market price is the same whether it is
paid in gold or in silver coin. The late reformation of the gold
coin, therefore, has raised not only the value of the gold coin, but
likewise that of the silver coin in proportion to gold bullion, and
probably too in proportion to all other commodities ; though the
price of the greater part of other commodities being influenced by
so many other causes, the rise in the value either of gold or silver
coin in proportion to them may not be so distinct and sensible.

In the English mint a pound weight of standard silver bullion
is coined into sixty-t'v shillings, containing, in the same manner,
a pound weight of standard silver. Five shillings and twopence
an ounce, therefore, is said to be the mint price of silver in England,
or the quantity of silver coin which the mint gives in return for
standard silver bullion. Before the reformation of the gold coin,
the market price of standard silver bullion was, upon different
occasions, five shillings and fourpenee, five shillings and fivepence,
five shillings and sixpence, five shillings and sevenpence, and very
often five shillings and eightpence an ounce. Five shillings and
sevenpence, however, seems to have been the most common price.
Since the reformation of the gold coin, the market price of standard
silver bullion has fallen occasionally to five shillings and threepence,
five shillings and fourpenee, and five shillings and fivcpence an
ounce, which last price it has scarce ever exceeded. Though the
market price of silver bullion has fallen considerably since the
reformation of the gold coin, it has not fallen so low as the
mint price.

In the proportion between the different metals in the English
coin, as copper is rated very much above its real value, so silver
is rated somewhat below it. In the market of Europe, in the
French coin and in the Dutch coin, an ounce of fine gold exchanges
for about fourteen ounces of fine silver. In the English coin it
exchanges for about fifteen ounces, that is, for more silver than

CHAP. T. THE WEALTH OF NATIONS. 45

it is worth according to the common estimation of Europe. But
as the price of copper in bars is not, even in Englandj raised by
the high price of copper in English coin, so the price of silver
in bullion is not sunk by the low rate of silver in English coin.
Silver in bullion still preserves its proper proportion to gold ; for
the same reason that copper in bars preserves its proper proportion
to silver.

Upon the reformation of the silver coin in the reign of William
III the price of silver bullion still continued to be somewhat above
the mint price. Mr. Locke imputed this high price to the per-
mission of exporting silver bullion, and to the prohibition of
exporting silver coin. 1 This permission of exporting, he said,
rendered the demand for silver bullion greater than the demand
for silver coin. But the number of people who want silver coin
for the common uses of buying and selling at home, is surely
much greater than that of those who want silver bullion either
for the use of exportation or for any other use. There subsists
at present a like permission of exporting gold bullion, and a like
prohibition of exporting gold coin ; and yet the price of gold
bullion has fallen below the mint price. 2 But in the English coin
silver was then, in the same manner as now, underrated in pro-
portion to gold; and the gold coin (which at that time too was
not supposed to require any reformation) regulated then, as well as
now, the real value of the whole coin. As the reformation of
silver coin did not then reduce the price of silver bullion to the
mint price, it is not very probable that a like reformation will do
so now.

Were the silver coin brought back as near to its standard weight
as the gold, a guinea, it is probable, would, according to the present
proportion, exchange for more silver in coin than it would purchase
in bullion. The silver coin containing its full standard weight,

1 Locke's Consideration a concerning threepence an ounce more than foreign

Raising the Value of Money, 2nd edit. coin. This difference in value is instruc-

(1695), p. 35 sqq. tive. It first shows how difficult it is

a After the resumption of cash pay- for regulations affecting the trade in the

ments, the exportation of silver and gold precious metals to be operative, nd next

coin was made free. Before that time, it affords a proof, by pointing out what

bullion and foreign gold coins could be was the market-price of perjury, how

exported. If bullion was exported, the utterly ineffectual oaths and declara-

dealer had to supply an affidavit that tions are when they do not appeal to the

the bullion was not the produce of Eng- moral sense of mankind, but to merely

lish coin, such bullion being called tech- arbitrary regulations,
nically sworn-off gold, and being worth

46 THE NATURE AND CAUSES OF BOOK i.

there would in this case be a profit in melting 1 it down, in order,
first, to sell the bullion for gold coin, and afterwards to exchange
this gold coin for silver coin to be melted down in the same
manner. Some alteration in the present proportion seems to be
the only method of preventing this inconveniency.

The inconveniency perhaps would be less if silver was rated in
the coin as much above its proper proportion to gold as it is
at present rated below it; provided it was at the same time
enacted that silver should not be a legal tender for more than
the change of a guinea ; in the same manner as copper is not a
legal tender for more than the change of a shilling. No creditor
could in this case be cheated in consequence of the high valuation
of silver in coin ; as no creditor can at present be cheated in
consequence of the high valuation of copper. The bankers only
would suffer by this regulation. When a run comes upon them
they sometimes endeavour to gain time by paying in sixpences,
and they would be precluded by this regulation from this dis-
creditable method of evading immediate payment. They would
be obliged in consequence to keep at all times in their coffers a
greater quantity of cash than at present ; and though this might
no doubt be a considerable inconveniency to them, it would at
the same time be a considerable security to their creditors.

Three pounds seventeen shillings and tenpcnce halfpenny (the
mint price of gold) certainly does not contain, even in our present
excellent gold coin, more than an ounce of standard gold, and it
may be thought, therefore, should not purchase more standard
bullion. But gold in coin is more convenient than gold in bullion,
and though, in England, the coinage is free, yet the gold which
is carried in bullion to the mint can seldom be returned in coin to
the owner till after a delay of several weeks. In the present hurry
of the mint, it could not be returned till after a delay of several
months. 1 This delay is equivalent to a small duty, and renders
gold in coin somewhat more valuable than an equal quantity of
gold in bullion. If in the English coin silver was rated according
to its proper proportion to gold, the price of silver bullion would
probably fall below the mint price even without any reformation

1 This slight indirect seignorage is still coined except by the Bank of England,

levied on gold by the loss of interest in- to which establishment no such loss at-

curred while the metal lies at the mint. taches.

As a consequence, very little gold is *

CHAP. v. THE WEALTH OF NATIONS. 47

of the silver coin ; the value even of the present worn and defaced
silver coin being regulated hy the value of the excellent gold coin
for which it can be changed.

A small seignorage or duty upon the coinage of both gold and
silver would probably increase still more the superiority of those
metals in coin above an equal quantity of either of them in bullion.
The coinage would in this case increase the value of the metal
coined in proportion to the extent of this small duty; for the
same reason that the fashion increases the value of plate in pro-
portion to the price of that fashion. The superiority of coin above
bullion would prevent the melting down of the coin, and would
discourage its exportation. If upon any public exigency it should
become necessary to export the coin, the greater part of it would
soon return again of its own accord. Abroad it could sell only
for its weight in bullion. At home it would buy more than that
weight. There would be a profit, therefore, in bringing it home
again. In France a seignorage of about eight per cent, is imposed
upon the coinage, and the French coin, when exported, is said
to return home again of its own accord. 1

The occasional fluctuations in the market price of gold and
silver bullion arise from the same causes as the like fluctuations
in that of all other commodities. The frequent loss of those
metals from various accidents by sea and by land, the continual
waste of them in gilding and plating, in lace and embroidery, in
the wear and tear of coin, and in that of plate, require, in all
countries which possess no mines of their own, a continual im-
portation in order to repair this loss and this waste. The merchant
importers, like all other merchants, we may believe, endeavour,
as well as they can, to suit their occasional importations to what,
they judge, is likely to be the immediate demand. With all
their attention, however, they sometimes overdo the business, and
sometimes underdo it. When they import more bullion than is
wanted, rather than incur the risk and trouble of exporting it
again, they are sometimes willing to sell a part of it for some-
thing less than the ordinary or average price. When, on the other
hand, they import less than is wanted, they get something more

1 The seignorage on French gold and about 4 per cent, on gold, il per cent,
silver coin was not more than li per on silver,
cent in Smith's time. It is now only

48 THE NATURE AND CAUSES OF BOOK i.

than this price. But when, under all those occasional fluctuations,
the market price either of gold or silver bullion continues for
several years together steadily and constantly, either move or less
above, or more or less below the mint price ; we may be assured
that this steady and constant, either superiority or inferiority
of price, is the effect of something in the state of the coin
which, at that time, renders a certain quantity of coin either of
more value or of less value than the precise quantity of bullion
which it ought to contain. The constancy and steadiness of the
effect supposes a proportionate constancy and steadiness in the
cause.

The money of afiy particular country is, at any particular time
and place, more or less an accurate measure of value according as
the current coin is more or less exactly agreeable to its standard,
or contains more or less exactly the precise quantity of pure gold
or pure silver which it ought to contain. If in England, for
example, forty-four guineas and a half contained exactly a pound
weight of standard gold, or eleven ounces of fine gold and one
ounce of alloy, the gold coin of England would be as accurate a
measure of the actual value of goods at any particular time and
place as the nature of the thing would admit. 1 But if, by rub-
bing and wearing, forty-four guineas and a lyilf generally contain
less than a pound weight of standard gold, the diminution, how-
ever, being greater in some pieces than in others; the measure
of value comes to be liable to the same sort of uncertainty to which
all other weights and measures are commonly exposed. As it rarely
happens that these are exactly agreeable to their standard, the
merchant adjusts the price of his goods, as well as he can, not to
what those weights and measures ought to be, but to what, upon
an average, he finds by experience they actually are. In con-
sequence of a like disorder in the coin the price of goods comes,
in the same manner, to be adjusted, not to the quantity of pure
gold or silver which the coin ought to contain, but to that
which, upon an average, it is found by experience it actually does
contain.

By the money-price of goods, it is to be observed, I understand

* At present (1880) sovereigns are fore weighs 5 dwts. 3^^ grs., the fine
coined out of 40 Troy pounds' weight of weight being 1 13^3- grsf
gold ii-i2ths fine. A sovereign there-

CHAP. iv. THE WEALTH OF NATIONS. 49

always the quantity of pure gold or silver for which they are sold,
without any regard to the denomination of the coin. Six shillings
and eightpence, for example, in the time of Edward I, I consider
as the same money-price with a pound sterling in the present times ;
because it contained, as nearly as we can judge, the same quantity
of pure silver.

CHAPTER VI.

OF THE COMPONENT PARTS OP THE PRICE OF COMMODITIES.

IN that early and rude state of society which precedes both
the accumulation of stock and the appropriation of land, the
proportion between the quantities of labour necessary for acquiring
different objects seems to be the only circumstance which can
afford any rule for exchanging them for one another. If among
a nation of hunters, for example, it usually costs twice the labour
to kill a beaver which it does to kill a deer, one beaver should
naturally exchange for or be worth two deer. It is natural that
what is usually the produce of two days' or two hours' labour,
should be worth double of what is usually the produce of one
day's or one hour's labour.

If the one species of labour should be more severe than the other,
some allowance will naturally be made for this superior hardship ;
and the produce of one hour's labour in the one way may frequently
exchange for that of two hours' labour in the other.

Or if the one species of labour requires an uncommon degree
of dexterity and ingenuity, the esteem which men have for such
talents will naturally give a value to their produce, superior to
what would be due to the time employed about it. Such talents
can seldom be acquired but in consequence of long application, and
the superior value of their produce may frequently be no more than
a reasonable compensation for the time and labour which must be
spent in acquiring them. In the advanced state of society, allow-
ances of this kind, for superior hardship and superior skill, are
commonly made iu the wages of labour ; and something of the

VOL. i. E

50 THE NATURE AND CAUSES OF BOOK i.

same kind must probably have taken place in its earliest and rudest
period. 1

In this state of things, the whole produce of labour belongs to
the labourer ; and the quantity of labour commonly employed in
acquiring or producing any commodity is the only circumstance
which can regulate the quantity of labour which it ought commonly
to purchase, command, or exchange for.

As soon as stock has accumulated in the hands of particular
persons, some of them will naturally employ it in setting to work
industrious people, whom they will supply with materials and sub-
sistence, in order to make a profit by the sale of their work, or by
what their labour adds to the value of the materials. In exchanging
the complete manufacture either for money, for labour, or for other
goods, over and above what may be sufficient to pay the price of
the materials and the wages of the workmen, something must be
given for the profits of the undertaker of the work who hazards
his stock in this adventure. The value which the workmen add to
the materials, therefore, resolves itself in this case into two parts,
of which the one pays their wages, the other the profits of their
employer upon the whole stock of materials and wages which he
advanced. He could have no interest to employ them, unless he
expected from the sale of their work something more than what
was sufficient to replace his stock to him ; and he could have no
interest to employ a great stock rather than a small one, unless his
profits were to bear some proportion to the extent of his stock.

The profits of stock, it may perhaps be thought, are only a
different name for the wages of a particular sort of labour, the
labour of inspection and direction. They are, however, altogether
different, are regulated by quite different principles, and bear no
proportion to the quantity, the hardship, or the ingenuity of this
supposed labour of inspection and direction. They are regulated
altogether by the value of the stock employed, and are greater or
smaller in proportion to the extent of this stock. Let us suppose,

1 In order, however, that any ' allow- particular, than the author of the Wealth

ance * should be made for the dexterity, of Nations. But of course no due allow-

ingenuity, or other mental quality dis- ance' was made for this service. The

tinguishing an individual's labour, it is labour to which allusion is made is

necessary that the product of the labour mechanical, or inventive of mechanical

should be in demand. Perhaps no writer expedients, and concerned with the pro-

ever conferred larger benefits on man- duction of material utilities, such utilities

kind geneially, and on this country in being generally marketable, i.e. in demand.

CHAP. vi. THE WEALTH OF NATIONS. 51

for example, that in some particular place, where the common
annual profits of manufacturing stock are ten per cent., there are
two different manufactures, in each of which twenty workmen are
employed at the rate of fifteen pounds a year each, or at the expense
of three hundred a year in each manufactory. Let us suppose too,
that the coarse materials annually wrought up in the one cost only
seven hundred pounds, while the finer materials in the other cost
seven thousand. The capital annually employed in the one will in
this case amount only to one thousand pounds ; whereas that em-
ployed in the other will amount to saven thousand three hundred
pounds. At the rate of ten per cent., therefore, the undertaker of
the one will expect a yearly profit of about one hundred pounds
only; while that of the other will expect about seven hundred and
thirty pounds. But though their profits are so very different, their
labour of inspection and direction may be either altogether or very
nearly the same. In many great works, almost the whole labour of
this kind is committed to some principal clerk. His wages properly
express the value of this labour of inspection and direction. Though
in settling them some regard is had commonly, not only to his
labour and skill, but to the trust which is reposed in him, yet they
never bear any regular proportion to the capital of which he over-
sees the management ; and the owner of this capital, though he is
thus discharged of almost all labour, still expects that his profits
should bear a regular proportion to his capital. In the price of
commodities, therefore, the profits of stock constitute a component}
part altogether different from the wages of labour and regulated by
quite different principles. 1

1 Undoubtedly the capitalist who in- which * good-will ' or * connexion ' is a con-
vests seven thousand three hundred spicuous element. Now this good-will is
pounds in his business, will expect, and practically as much a part of the capital
for sufficient reasons will obtain, a larger invested in a business as the plant and
amount of interest on his capital than goods in a manufactory or a shop. The
another who invests only one thousand. late experience of joint-stock enterprise
But the hypothesis that the ' common in which it is not necessary to include
annual profits ' can be treated as an in- fraudulent or speculative undertakings
variable quantity is not warranted by proves that on the whole, and at an
facts. The rate of so-called profit ob- average, the rate of piofit attainable in
tained by a small dealer in a country such kinds of business as require the
village is far in excess of that obtained superintendence of paid officials is not
by a merchant who carries on a large much, if at all, in excess of the ordinary
business over a wide market. rate of interest, and that the introduction

In those cases in which the labour of of a system by which such officials are paid

superintendence can be safely committed proportionately to ' profits,' does not ma-

to subordinates, it will always be found terially alter this rule, though it imparts

that the business is of that character in security to the transactions entered on.

E 2

52 THE NATURE AND CAUSES OF BOOK i.

In this state of things, the whole produce of labour does not
always belong to the labourer. He must in most cases share it
with the owner of the stock which employs him. Neither is the
quantity of labour commonly employed in acquiring or producing
any commodity the only circumstance which can regulate the
quantity which it ought commonly to purchase, command, or ex-
change for. An additional quantity, it is evident, must be due for
the profits of the stock which advanced the wages and furnished the
materials of that labour.

As soon as the land of an^ country has all become private pro-
perty, the landlords, like all other men, love to reap where they
never sowed, and demand a rent even for its natural produce. The
wood of the forest, the grass of the field, and all the natural fruits
of the earth, which, when land was in common, cost the labourer
only the trouble of gathering them, come, even to him, to have an
additional price fixed upon them. He must then pay for the licence
to gather them; and must give up to the landlord a portion of
what his labour either collects or produces. This portion, or, what
comes to the same thing, the price of this portion, constitutes the
rent of land, and in the price of the greater part of commodities
makes a third component part. 1

The real value of all the different component parts of price, it
must be observed, is measured by the quantity of labour which they
can, each of them, purchase or command. Labour measures the
value not only of that part of price which resolves itself into labour,
but of that which resolves itself into rent, and of that which resolves
itself into profit.

In every society the price of every commodity finally resolves
itself into some one or other, or all of those three parts ; and in
every improved society, all the three enter more or less, as com-
ponent parts, into the price of the far greater part of commodities.

In the price of corn, for example, one part pays the rent of the
landlord, another pays the wages or maintenance of the labourers

1 Profit and rent do not constitute in Illinois and Ohio, where profits and

prices or values, but are consequent on wages are equally large. Nor would the

them. This will be clear, if we keep in annihilation of rents cheapen produce,

view the fundamental fact, that price or though rent does arise from the fact that,

value are determined by demand and relatively speaking, produce is saleable at

supply. Articles are not cheap or dear a higher price than is sufficient to cover

because profits are high and wages are the cost of production.
Ligh. Wheat is nowhere cheaper than

CHAP. vi. THE WEALTH OF NATIONS. 53'

and labouring cattle employed in producing it, and the third pays
the profit of the farmer. These three parts seem either immediately
or ultimately to make up the whole price of corn. A fourth part,
it may perhaps be thought, is necessary for replacing the stock of
the farmer, or for compensating the wear and tear of his labouring
cattle and other instruments of husbandry. But it must be con-
sidered that the price of any instrument of husbandry, such as a
labouring horse, is itself made up of the same three parts ; the rent
of the land upon which he is reared, the labour of tending and
rearing him, and the profits of the farmer who advances both the
rent of this land and the wages of this labour. Though the price
of the corn, therefore, may pay the price as well as the maintenance
of the horse, the whole price still resolves itself either immediately
or ultimately into the same three parts of rent, labour, and profit.

In the price 'of flour or meal, we must add to the price of the
corn, the profits of the miller and the wages of his servants; in
the price of bread, the profits of the baker and the wages of his
servants ; and in the price of both, the labour of transporting the
corn from the house of the farmer to that of the miller, and from
that of the miller to that of the baker, together with the profits of
those who advance the wages of that labour.

The price of flax resolves itself into the same three parts as that
of corn. In the price of linen we must add to this price the wages
of the flaxdresscr, of the spinner, of the weaver, of the bleacher, &c.,
together with the profits of their respective employers.

As any particular commodity comes to be more manufactured,
that part of the price which resolves itself into wages and profit
comes to be greater in proportion to that which resolves itself into
rent. In the progress of the manufacture, not only the number of
profits increase, but every subsequent profit is greater than the
foregoing ; because the capital from which it is derived must always
be greater. The capital which employs the weavers, for example,
must be greater than that which employs the spinners ; because it
not only replaces that capital with its profits, but pays, besides, the
wages of the weavers ; and the profits must always bear some pro-
portion to the capital. 1

1 This is the ease even in some un- colliery, is very small when compared

manufactured articles. The proportion with the proportion received by the ca-

which the rent of land bears to the price pitalist who rents and the labourer who

of coal, great as is the rental of a good digs the coal.

54 THE NATURE AND CAUSES OF BOOK i.

In the most improved societies, however, there are always a few
commodities of which the price resolves itself into two parts only,
the wages of labour and the profits of stock ; and a still smaller
number in which it consists altogether in the wages of labour. In
the price of sea-fish, for example, one part pays the labour of the
fisherman, and the other the profits of the capital employed in the
fishery. Rent very seldom makes any part of it, though it does
sometimes, as I shall show hereafter. It is otherwise, at least
through the greater part of Europe, in river fisheries. A salmon
fishery pays a rent, and rent, though it cannot well be called the
rent of land, makes a part of the price of a salmon as well as wages
and profit. In some parts of Scotland a few poor people make a
trade of gathering, along the sea-shore, those little variegated stones
commonly known by the name of Scotch Pebbles. The price which
is paid to them by the stone-cutter is altogether the wages of their
labour ; neither rent nor profit make any part of it.

But the whole price of any commodity must still finally resolve
itself into some one or other, or all of those three parts ; as whatever
part of it remains after paying the rent of the land, and the price of
the whole labour employed in raising, manufacturing, and bringing
it to market, must necessarily be profit to somebody.

As the price or exchangeable value of every particular commodity,
taken separately, resolves itself into some one or other or all of those
three parts ; so that of all the commodities which compose the whole
annual produce of the labour of every country, taken complexly,
must resolve itself into the same three parts, and be parcelled out
among different inhabitants of the country, either as the wages of
their labour, the profits of their stock, or the rent of their land.
The whole of what is annually either collected or produced by the
labour of every society, or what comes to the same thing, the whole
price of it, is in this manner originally distributed among some of
its different members. Wages, profit, and rent are the three original
sources of all revenue as well as of all exchangeable value. All other
revenue is ultimately derived from some one or other of these.

Whoever derives his revenue from a fund which is his own, must
draw it either from his labour, from his stock, or from his land. The
revenue derived from labour is called wages. That derived from
stock, by the person who manages or employs it, is called profit.
That derived from it by the person who does not employ it himself,

CHAP. vi. THE WEALTH OF NATIONS. 55

but lends it to another, is called the interest or* the use of money.
It is the compensation which the borrower pays to the lender, for
the profit which he has an opportunity of making by the use of the
money. Part of that profit naturally belongs to the borrower, who
runs the risk and takes the trouble of employing it ; and part to the
lender, who affords him the opportunity of making this profit. The
interest of money is always a derivative revenue, which, if it is not
paid from the profit which is made by the use of the money, must
be paid from some other source of revenue, unless perhaps the
borrower is a spendthrift, who contracts a second debt in order to
pay the interest of the first. The revenue which proceeds altogether
from land is called rent, and belongs to the landlord. The revenue
of the farmer is derived partly from his labour, and partly from his
stock. To him, land is only the instrument which enables him to
earn the wages of this labour, and to make the profits of this stock.
All taxes, and all the revenue which is founded upon them, all
salaries, pensions, and annuities of every kind, are ultimately derived
from some one or other of those three original sources of revenue,
and are paid either immediately or mediately from the wages of
labour, the profits of stock, or the rent of land.

When those three different sorts of revenue belong to different
persons, they are readily distinguished ; but when they belong to
the same, they are sometimes confounded with one another, at least
in common language.

A gentleman who farms a part of his own estate, after paying
the expense of cultivation, should gain both the rent of the
landlord and the profit of the farmer. He is apt to denomi-
nate, however, his whole gain c profit, 5 and thus confounds rent
with profit, at least in common language. The greater part of
our North American and West Indian planters are in this situa-
tion. They farm, the greater part of them, their own estates, and
accordingly we seldom hear of the rent of a plantation, but fre-
quently of its profit.

Common farmers seldom employ any overseer to direct the general
operations of the farm. They generally too work a good deal with
their own hands, as ploughmen, harrowers, &c. What remains of
the crop after paying the rent, therefore, should not only replace to
them their stock employed in cultivation, together with its ordinary
profits, but pay them the wages which are due to them, both as

56 THE NATURE AND CAUSES OF BOOK i.

labourers and overseers. Whatever remains, however, after paying
the rent and keeping up the stock, is called profit. But wages
evidently make a part of it. The farmer, by saving these wages,
must necessarily gain them. Wages, therefore, are in this case
confounded with profit.

An independent manufacturer, who has stock enough both to
purchase materials and to maintain himself till he can carry his
work to market, should gain both the wages of a journeyman who
works under a master, and the profit which that master makes by
the sale of the journeyman's work. His whole gains, however, are
commonly called profit, and wages are, in this case too, confounded
with profit.

A gardener who cultivates his own garden with his own hands,
unites in his own person the three different characters of landlord,
farmer, and labourer. His produce, therefore, should pay him the
rent of the first, the profit of the second, and the wages of the third.
The whole, however, is commonly considered as the earnings of his
labour. Both rent and profit are, in this case, confounded with
wages.

As in a civilised country there are but few commodities of which
the exchangeable value arises from labour only, rent and profit con-
tributing largely to that of the far greater part of them, 1 so the
annual produce of its labour will always be sufficient to purchase or
command a much greater quantity of labour than what was employed
in raising, preparing, and bringing that produce to market. If
the society was annually to employ all the labour which it can
annually purchase, as the quantity of labour would increase greatly
every year, so the produce of every succeeding year would be of
vastly greater value than that of the foregoing. But there is no
country in which the whole annual produce is employed in main-
taining the industrious. 2 The idle everywhere consume a great

1 Eent does not enter into the price of Book, is a part of the cost of production

commodities, but is a result of the price. as much as any other capital laid out in

Profit does not either, but is also a re- a permanent or fixed form, and so does

stilt, price being value interpreted by a enter into price. But its part in distri-

conventional standard. If it can be bution is strictly limited by competition,

shown that ^rent is part of the cost of 2 There certainly is not and cannot be

production, it would enter into price, or any country in which the whole produce

value. But rent arises, because the cost is expended in the maintenance of labour

of production is less than the value of for, to omit other cases, a considerable

the object in exchange, after labour is part of this annual produce is devoted to

paid and profit is satisfied. The building rearing children and supporting disease

rent, of which Smith speaks in the Fifth and old age. But there are and have

CHAP. vn. THE WEALTH OF NATIONS. 57

part of it ; and according to the different proportions in which it is
annually divided between those two different orders of people, its
ordinary or average value must either annually increase, or diminish,
or continue the same from one year to another.

CHAPTER VII.

OF THE NATURAL AND MARKET PRICE OF COMMODITIES.

FTPIHEKE is in every society or neighbourhood an ordinary or
-L average rate both of wages and profit in every different em-
ployment of labour and stock. This rate is naturally regulated, as
I shall show hereafter, partly by the general circumstances of the
society, their riches or poverty, their advancing, stationary, or
declining condition ; and partly by the particular nature of each
employment.

There is likewise in every society or neighbourhood an ordinary
or average rate of rent, which is regulated too, as I shall show here-
after, partly by the general circumstances of the society or neigh-
bourhood in which the land is situated, and partly by the natural
or improved fertility of the land.

These ordinary or average rates may bo called the natural rates
of wages, profit, and rent, at the time and place in which they
commonly prevail.

When the price of any commodity is neither more nor less than
what is sufficient to pay the rent of the land, the wages of the
labour, and the profits of the stock employed in raising, preparing,
and bringing to market, according to their natural rates, the com-
modity is then sold for what may be called its natural price.

Tho commodity is then sold precisely for what it is worth, or for
what it really costs the person who brings it to market ; for though
in common language what is called the prime cost of any com-

bcen countries in which the idle adults were consistently parsimonious, a,nd were

form a small percentage of the commu- therefore constantly accumulating capital,

nity, as in Holland, during the last cen- has occupied the attention of some econo-

tury at least, in Belgium and the United mists, and particularly Mr. Mill bk. i.

States at present. The question as to ch. 1 1 ; bk. iv. ch. 4.
what would be the consequence if societies

58 THE NATURE AND CAUSES OF BOOK i.

modity does not comprehend the profit of the person who is to sell
it again, yet if he sells it at a price which does not allow him the
ordinary rate of profit in his neighbourhood, he is evidently a loser
by the trade ; since by employing his stock in some other way he
might have made that profit. His profit, besides, is his revenue,
the proper fund of his subsistence. As, while he is preparing and
bringing the goods to market, he advances to his workmen their
wages, or their subsistence ; so he advances to himself, in the same
manner, his own subsistence, which is generally suitable to the
profit which he may reasonably expect from the sale of his goods.
Unless they yield him this profit, therefore, they do not repay him
what they may very properly be said to have really cost him.

Though the price, therefore, which leaves him this profit is not
always the lowest at which a dealer may sometimes sell his goods,
it is the lowest at which he is likely to sell them for any consider-
able time ; at least where there is perfect liberty, or where he may
change his trade as often as he pleases.

The actual price at which any commodity is commonly sold is
called its market price. It may cither be above, or below, or
exactly the same with its natural price.

The market price of every particular commodity is regulated by
the proportion between the quantity which is actually brought to
market, and the demand of those who are willing to pay the natural
price of the commodity, or the whole value of the rent, labour, and
profit which must be paid in order to bring it thither. Such
people may be called the effectual dcmandcrs, and their demand the
effectual demand ; since it maybe sufficient to effectuate the bring-
ing of the commodity to market. It is different from the absolute
demand. A very poor man may be said in some sense to have
a demand for a coach and six ; he might like to have it ; but his
demand is not an effectual demand, as the commodity can never be
brought to market in order to satisfy it. 1

When the quantity of any commodity which is brought to market
falls short of the effectual demand, all those who are willing to pay
the whole value of the rent, wages, and profit which must be paid
in order to bring it thither, cannot be supplied with the quantity
which they want. Rather than want it altogether, some of them

l <Ce sont tonjours les besoins et tent le prix b, la vente.' Turret,
les facultds du consommateur qui met- 67. to

CHAP. VIT. THE WEALTH OF NATIONS. 59

will be willing to give more. A competition will immediately begin
among them, and the market price will rise more or less above the
natural price, according as either the greatness of the deficiency, or
the wealth and wanton luxury of the competitors, happen to
animate more or less the eagerness of the competition. Among
competitors of equal wealth and luxury the same deficiency will
generally occasion a more or less eager competition, according as
the acquisition of the commodity happens to be of more or less
importance to them. Hence the exorbitant price of the necessaries
of life during the blockade of a town or in a famine. 1

"When the quantity brought to market exceeds the effectual de-
mand, it cannot be all sold to those who are willing to pay the
whole value of the rent, wages, and profit which must be paid in
order to bring it thither. Some part must be sold to those who are
willing to pay less, and the low price which they give for it must
reduce the price of the whole. The market price will sink more or
less below the natural price, according as the greatness of the excess
increases more or less the competition of the sellers, or according as
it happens to be more or less important to them to get immediately
rid of the commodity. The same excess in the importation of perish-
able, will occasion a much greater competition than in that of
durable commodities ; in the importation of oranges, for example,
than in that of old iron.

When the quantity brought to market is just sufficient to supply
the effectual demand and no more, the market price naturally comes
to be either exactly, or as nearly as can be judged of, the same with
the natural price. The whole quantity upon land can be disposed
of for this price, and cannot be disposed of for more. The com-
petition of the different dealers obliges them all to accept of this
price, but does not oblige them to accept of less.

The quantity of every commodity brought to market naturally
suits itself to the effectual demand. It is the interest of all those
who en) ploy their land, labour, or stock in bringing any commodity
to market, that the quantity never should exceed the effectual de-

1 At the conclusion of the seventeenth Defect.

century, Gregory King (see Davenant's i tenth \ / 3 tenths

Works, vol. ii. p. 224) reckoned that a 2 tenths I raises the price \ 8 tenths

defect in the harvest would raise the 3 tenths > above the < 1.6 tenths

price of com in the following propor- 4 tenths i common rate / 2.8 tenths

tions : 5 tenths / \ 4.5 tenths

60 THE NATURE AND CAUSES OF BOOK i.

mand ; and it is the interest of all other people that it never should
fall short of that demand.

If at any time it exceeds the effectual demand, some of the com-
ponent parts of its price must be paid below their natural rate. If
it is rent, the interest of the landlords will immediately prompt
them to withdraw a part of their land ; and if it is wages or profit,
the interest of the labourers in the one case, and of their employers
in the other, will prompt them to withdraw a part of their labour
or stock from this employment. The quantity brought to market
will soon be no more than sufficient to supply the effectual demand.
All the different parts of its price will rise to their natural rate, and
the whole price to its natural price.

If, on the contrary, the quantity brought to market should at
any time fall short of the effectual demand, some of the component
parts of its price must rise above their natural rate. If it is rent,
the interest of all other landlords will naturally prompt them to
prepare more land for the raising of this commodity; if it is wages
or profit, the interest of all other labourers and dealers will soon
prompt them to employ more labour and stock in preparing and
bringing it to market. The quantity brought thither will soon be
sufficient to supply the effectual demand. All the different parts of
its price will soon sink to their natural rate, and the whole price to
its natural price.

The natural price, therefore, is, as it were, the central price,
to which the prices of all commodities are continually gravitating.
Different accidents may sometimes keep them suspended a good
deal above it, and sometimes force them down even somewhat
below it. But whatever may be the obstacles which hinder them
from settling in this centre of repose and continuance, they are
constantly tending towards it.

The whole quantity of industry annually employed in order to
bring any commodity to market, naturally suits itself in this
manner to the effectual demand. It naturally aims at bringing
always that precise quantity thither which may be sufficient to
supply, and no more than supply, that demand.

But in some employments the same quantity of industry will
in different years produce very different quantities of commodities ;
while in others it will produce always the same, or very nearly
the same. The same number of labourers in husbandry will, in

CHAP. vn. THE WEALTH OF NATIONS. 61

different years, produce very different quantities of corn, wine,
oil, hops, &c. But the same number of spinners and weavers
will every year produce the same or very nearly the same quantity
of linen and woollen cloth. 1 It is only the average produce of
the one species of industry which can be suited in any respect
to the effectual demand ; and as its actual produce is frequently
much greater and frequently much less than its average produce,
the quantity of the commodities brought to market will some-
times exceed a good deal, and sometimes fall short a good deal,
of the effectual demand. Even though that demand therefore
should continue always the same, their market price will be liable
to great fluctuations, will sometimes fall a good deal below, and
sometimes rise a good deal above their natural price. In the
other species of industry, the produce of equal quantities of labour
being always the same or very nearly the same, it can be more
exactly suited to the effectual demand. While that demand con*
tinues the same, therefore, the market price of the commodities
is likely to do so too, and to be either altogether, or as nearly
as can be judged of, the same with the natural price. That the
price of linen and woollen cloth is liable neither to such frequent
nor to such great variations as the price of corn, every man's
experience will inform him. The price of the one species of com-
modities varies only with the variations in the demand : that of
the other varies, not only with the variations in the demand, but
with the much greater and more frequent variations in the quantity
of what is brought to market in order to supply that demand.

The occasional and temporary fluctuations in the market price
of any commodity fall chiefly upon those parts of its price which
resolve themselves into wages and profit. 2 That part which re-
solves itself into rent is less affected by them. A rent certain
in money is not in the least affected by them either in its rate or
in its value. A rent which consists either in a certain proportion
or in a certain quantity of the rude produce, is no doubt affected
in its yearly value by all the occasional and temporary fluctuations

1 The passage in the text is no longer the loss of low and the gain of high
applicable to the principle which it is in- prices affect profit. When the fluctuation
tended to illustrate. Since Adam Smith's is frequent, it becomes a risk, and is corn-
time, production has increased yearly, pensated for by higher profits, and gene-
and supply has preceded demand, stimu- rally by higher wages. In a word, risk
lating and extending the latter. is an element of cost.

a When the fluctuation is exceptional,

62 THE NATURE AND CAUSES OF BOOK i.

in the market price of that rude produce : but it is seldom affected
by them in its yearly rate. In settling the terms of the lease,
the landlord and farmer endeavour, according to their best judg-
ment, to adjust that rate, not to the temporary and occasional,
but to the average and ordinary price of the produce.

Such fluctuations affect both the value and the rate either of
wages or of profit, according as the market happens to be either
overstocked or understocked with commodities or with labour;
with work done, or with work to be done. A public mourning
raises the price of black cloth (with which the market is almost
always understocked upon such occasions), and augments the profits
of the merchants who possess any considerable quantity of it. It
has no effect upon the wages of the weavers. The market is
understocked with commodities, not with labour ; with work done,
not with work to be done. It raises the wages of journeymen
tailors. The market is here understocked with labour. There is
an effectual demand for more labour, for more work to be done
than can be had. It sinks the price of coloured silks and cloths,
and thereby reduces the profits of the merchants who have any
considerable quantity of them upon hand. It sinks too the wages
of the workmen employed in preparing such commodities, for which
all demand is stopped for six months, perhaps for a twelvemonth.
The market is here overstocked both with commodities and with
labour.

But though the market price of every particular commodity is
in this manner continually gravitating, if one may say so, towards
the natural price, yet sometimes particular accidents, sometimes
natural causes, and sometimes particular regulations of police, may,
in many commodities, keep up the market price for a long time
together a good deal above the natural price.

When by an increase in the effectual demand the market price
of some particular commodity happens to rise a good deal above
the natural price, those who employ their stocks in supplying
that market are generally careful to conceal this change. If it
was commonly known, their great profit would tempt so many
new rivals to employ their stocks in the same way, that, the
effectual demand being fully supplied, the market price would
soon be reduced to the natural price, and perhaps for some time
even below it. If the market is at a great distance from the

CHAP. vn. THE WEALTH OF NATIONS. 63

residence of those who supply it, they may sometimes be able to
keep the secret for several years together, and may so long enjoy
their extraordinary profits without any new rivals. Secrets of
this kind, however, it must be acknowledged, can seldom be long
kept ; and the extraordinary profit can last very little longer than
they are kept.

Secrets in manufactures are capable of being longer kept than
secrets in trade. A dyer who has found the means of producing
a particular colour with materials which cost only half the price
of those commonly made use of, may, with good management,
enjoy the advantage of his discovery as long as he lives, and even
leave it as a legacy to his posterity. His extraordinary gains
arise from the high price which is paid for his private labour.
They properly consist in the high wages of that labour. But as
they are repeated upon every part of his stock, and as their
whole amount bears, upon that account, a regular proportion to it,
they are commonly considered as extraordinary profits of stock. 1

Such enhancements of the market price are evidently the effects
of particular accidents, of which, however, the operation may some-
times last for many years together.

Some natural productions require such a singularity of soil and
situation, that all the land in a great country which is fit for
producing them may not be sufficient to supply the effectual de-
mand. The whole quantity brought to market, therefore, may
be disposed of to those who are willing to give more than what
is sufficient to pay the rent of the land which produced them,
together with the wages of the labour, and the profits of the
stock which were employed in preparing and bringing them to
market, according to their natural rates. Such commodities may
continue for whole centuries together to be sold at this high price ;
and that part of it which resolves itself into the rent of land is
in this case the part which is generally paid above its natural
rate. The rent of the land which affords such singular and

1 The advantage which the dyer, in which his less competent rivals had he-
Smith's hypothetical case, obtains, is all fore the new process or new colour
the difference between the cost of pro- entered into competition with theirs,
ducing his colour and the price which By degrees, the manufacturer learns that
the public are willing to pay for it. This he may still further reduce his price,
price, again, is always just as much as But he does this when he finds that
will be sufficient to appropriate, by su- greater cheapness induces increased de-
perior cheapness or quality, the trade maud, or developes a wider market.

64 THE NATURE AND CAUSES OF BOOK i.

esteemed productions, like the rent of some vineyards in France
of a peculiar happy soil and situation, bears no regular proportion
to the rent of other equally fertile and equally well-cultivated land
in its neighbourhood. 1 The wages of the labour and the profits
of the stock employed in bringing such commodities to market,
on the contrary, are seldom out of their natural proportion to those
of the other employments of labour and stock in their neighbour-
hood.

Such enhancements of the market price are evidently the effect
of natural causes which may hinder the effectual demand from ever
being fully supplied, and which may continue, therefore, to operate
for ever.

A monopoly granted either to an individual or to a trading
company has the same effect as a secret in trade or manufactures.
The monopolists, by keeping the market constantly understocked,
by never fully supplying the effectual demand, sell their com-
modities much above the natural price, and raise their emolu-
ments, whether they consist in wages or profit, greatly above their
natural rate.

The price of monopoly is upon every occasion the highest which
can be got. 2 The natural price, or the price of free competition,
on the contrary, is the lowest which can be taken, not upon every
occasion, indeed, but for any considerable time together. The one
is upon every occasion the highest which can be squeezed out of
the buyers, or which, it is supposed, they will consent to give :
the other is the lowest which the sellers can commonly afford to
take and at the same time continue their business. 3

1 The value of such land has increased than that which free competition would
enormously since the time in which Adam ordinarily reach. Thus, for example,
Smith wrote. Vineyards in France, the the Post Office in this country is a mo-
produce of which is greatly esteemed, sell nopoly. But the service, though ex-
for more than 1000 the acre. Perhaps ceedingly profitable to the revenue, is
some of the most valuable agricultural done at a cheaper rate than, in all like-
land in England are the best hop-grounds lihood, private enterprise would have ful-
in the vale of Farnham, which are said filled it. The projectors of the Post
to have been sold at ,600 the acre. Office reform of 1 840 anticipated the

2 The tendency of a monopoly is to effects of stimulating a demand.

aim at the highest possible price, and as 3 Free competition does not necessarily

the holder of a monopoly seldom under- induce cheapness, especially when the

stands the conditions under which demand service supplied involves a large outlay

is stimulated, the price demanded is ge- of fixed capital. There is a perfectly

nei ally the highest attainable. A notable free competition for cab-service in Lon-

instance of this monopoly price is that of don ; but nobody doubts that this service

the Dutch spice trade. But on the other could be rendered at far lower cost than

hand, a monopoly price may be lower at present if the cabs were fewer. So,

CHAP. vii. THE WEALTH OF NATIONS. 65

The exclusive privileges of corporations, statutes of apprentice-
ship, and all those laws which restrain in particular employments
the competition to a smaller number than might otherwise go
into them, have the same tendency, though in a less degree. They
are a sort of enlarged monopolies, and may frequently, for ages
together, and in whole classes of employments, keep up the market
price of particular commodities above the natural price, and main-
tain both the wages of the labour and the profits of the stock
employed about them somewhat above their natural rate. 1

Such enhancements of the market price may last as long as the
regulations of police which give occasion to them.

The market price of any particular commodity, though it may
continue long above, can seldom continue long below its natural
price. Whatever part of it was paid below the natural rate, the
persons whose interest it affected would immediately feel the loss,
and would immediately withdraw either so much land, or so much
labour, or so much stock, from being employed about it, that the
quantity brought to market would soon be no more than sufficient
to supply the effectual demand. Its market price, therefore, would
soon rise to the natural price. This at least would be the case
where there was perfect liberty. 2

The same statutes of apprenticeship and other corporation laws
indeed, which, when a manufacture is in prosperity, enable the
workman to raise his wages a good deal above the natural rate,
sometimes oblige him, when it decays, to let them down a good
deal below it. As in the one case they exclude many people from
his employment, so in the other they exclude him from many
employments. The effect of such regulations, however, is not near

again, there is a fairly free competition partly by limiting the number of labour-
of railways; but transit has not been ers t partly by enhancing the cost of pro-
cheapened by this competition. Hence ducing the labour, for other things being
some economists, as for example Mr. E. considered and accounted for, the rate
Chadwiok, have argued in favour of of wages follows the ordinary rule, that
competition for the field of employment, the price of commodities and services is
as contrasted with competition in the determined by the cost of producing
field. them. See for an illustration of the
1 Corporations do not necessarily raise effects of corporate monopolies, strict ap-
the rate of profit or that of wages. Ihey prenticeship regulations, &c., Wilber-
will not do so, unless the number of those force's Social Life in Munich,
employed in supplying a necessity is a The qualification is essential, if we
strictly limited. Otherwise the exceptional are to believe that the constrained cul-
profit obtained at first by the privilege tivation of indigo and opium in India
is neutralized by competition. Appren- entailed a loss on the agriculturist,
ticeships do raise the rate of wages,

VOL. I. F

66 THE NATURE AND CAUSES OF BOOK i.

so durable in sinking the workman's wages below, as in raising
them above their natural rate. Their operation in the one way
may endure for many centuries, but in the other it can last no
longer than the lives of some of the workmen who were bred to
the business in the time of its prosperity. When they are gone,
the number of those who are afterwards educated to the trade will
naturally suit itself to the effectual demand. The police must be
as violent as that of Hindostan or ancient Egypt (where every
man was bound by a principle of religion to follow the occupation
of his father, and was supposed to commit the most horrid sacri-
lege if he changed it for another) which can in any particular
employment, and for several generations together, sink either the
wages of labour or the profits of stock below their natural rate.

This is all that I think necessary to be observed at present con-
cerning the deviations, whether occasional or permanent, of the
market price of commodities from the natural price.

The natural price itself varies with the natural rate of each of its
component parts, of wages, profit, and rent ; and in every society
this rate varies according to their circumstances, according to their
riches or poverty, their advancing, stationarj', or declining condition.
I shall, in the four following chapters, endeavour to explain, as fully
and distinctly as I can, the causes of those different variations.

First, I shall endeavour to explain what are the circumstances
which naturally determine the rate of wages, and in what manner
those circumstances are affected by the riches or poverty, by the
advancing, stationary, or declining state of the society.

Secondly, I shall endeavour to show what are the circumstances
which naturally determine the rate of profit, and in what manner
too those circumstances are affected by the like variations in the
state of the society.

Though pecuniary wages and profit are very different in the
different employments of labour and stock ; yet a certain proportion
seems commonly to take place between both the pecuniary wages in
all the different employments of labour, and the pecuniary profits in
all the different employments of stock. 1 This proportion, it will

1 This position has been materially the industrial classes into two bodies, the
modified by the development of modern highly-trained machinist, and the un-
industry. At present the tendency of skilled labourer. For example, the hand-
invention is to eliminate skilled labour by loom weaver has almost disappeared, and
mechanical adaptations, and to separate the joiner speedily will.

CHAP. vin. THE WEALTH OF NATIONS. 67

appear hereafter, depends partly upon the nature of the different
employments, and partly upon the different laws and policy of the
society in which they are carried on. But though in many respects
dependent upon the laws and policy, this proportion seems to be
little affected by the riches or poverty of that society; by its
advancing, stationary, or declining condition; but to remain the
same or very nearly the same in all those different states. I shall,
in the third place, endeavour to explain all the different circum-
stances which regulate this proportion.

In the fourth and last place, I shall endeavour to show what are
the circumstances which regulate the rent of land, and which either
raise or lower the real price of all the different substances which
it produces.

CHAPTER VIII.

OF THE WAGES OF LABOUR.

produce of labour constitutes the natural recompense or
JL wages of labour.

In that original state of things which precedes both the appro-
priation of land and the accumulation of stock, the whole produce of
labour belongs to the labourer. He has neither landlord nor master
to share with him.

Had this state continued, the wages of labour would have
augmented with all those improvements in its productive powers to
which the division of labour gives occasion. All things would gra-
dually have become cheaper. They would have been produced by a
smaller quantity of labour ; and as the commodities produced by
equal quantities of labour would naturally in this state of things be
exchanged for one another, they would have been purchased like-
wise with the produce of a smaller quantity.

"But though all things would have become cheaper in reality, in
appearance many things might have become dearer than before, or
have been exchanged for a greater quantity of other goods. Let us
suppose, for example, that in the greater part of employments the

68 THE NATURE AND CAUSES OF BOOK i.

productive powers of labour had been improved to tenfold, or that
a day's labour could produce ten times the quantity of work which
it had done originally; but that in a particular employment they
had been improved only to double, or that a day's labour could pro-
duce only twice the quantity of work which it had done before. In
exchanging the produce of a day's labour in the greater part of
employments, for that of a day's labour in this particular one, ten
times the original quantity of work in them would purchase only
twice the original quantity in it. Any particular quantity in it,
therefore, a pound weight, for example, would appear to be five
times dearer than before. In reality, however, it would be twice as
cheap. 1 Though it required five times the quantity of other goods
to purchase it, it would require only half the quantity of labour
either to purchase or to produce it. The acquisition, therefore,
would be twice as easy as before.

But this original state of things, in which the labourer enjoyed
the whole produce of his own labour, could not last beyond the first
introduction of the appropriation of land and the accumulation of
stock. It was at an end, therefore, long before the most considerable
improvements were made in the productive powers of labour, and it
would be to no purpose to trace farther what might have been its
effects upon the recompense or wages of labour.

As soon as land becomes private property, the landlord demands
a share of almost all the produce which the labourer can either raise
or collect from it. His rent makes the first deduction from the
produce of the labour which is employed upon land.-

It seldom happens that the person who tills the ground hns
wherewithal to maintain himself till he reaps the harvest. His
maintenance is generally advanced to him from the stock of a

1 Many illustrations of this position for the purpose of illustrating Smith's

could be given from the history of prices. position.

Two will suffice. During the fourteenth 2 It is scarcely necessary to say that rent
century, the average price of iron was has hardly so invidious an origin aw that
about 066 the ton, that of lead about 5. which the text implies. The continuous
The present prices are about 5 and 20. ownership of land is an antecedent con-
But the average rise in prices of wheat, dition of agriculture. Ownership and
labour, &c., is about nine times. Iron occupancy are exercised by different pT-
therefore costs about one tenth as much sons, as soon as ever the value of the
labour to produce it, at it cost five hundred produce of agriculture exceeds the cost
years ago ; lead is procured at about one- of production. If a rent be exacted he-
fourth the cost. These calculations take fore this surplus is arrived at, it is not a
no account of the rent of mines, and are rent, but a tax.
designedly rough, but they are sufficient

CHAP. viir. THE WEALTH OF NATIONS. 69

master, the farmer who employs him, and who would have no
interest to employ him, unless he was to share in the produce of his
labour, or unless his stock was to be replaced to him with a profit.
This profit makes a second deduction from the produce of the labour
which is employed upon land. 1

The produce of almost all other labour is liable to the like deduc-
tion of profit. In all arts and manufactures the greater part of
the workmen stand in need of a master to advance them the
materials of their work, and their wages and maintenance till it be
completed. He shares in the produce of their labour, or in the
value which it adds to the materials upon which it is bestowed ; and
in this share consists his profit.

It sometimes happens, indeed, that a single independent work-
man has stock sufficient both to purchase the materials of his work,
and to maintain himself till it be completed. He is both master
and workman, and enjoys the whole produce of his own labour, or
the whole value which it adds to the materials upon which it is
bestowed. It includes what are usually two distinct revenues,
belonging to two distinct persons, the profits of stock and the
wages of labour.

Such cases, however, are not very frequent, and in every part of
Europe, twenty workmen serve under a master for one that is inde-
pendent ; and the wages of labour are everywhere understood to be,
what they usually are, when the labourer is one person and the
owner of the stock which employs him another. 2

What are the common wages of labour depends everywhere upon
the contract usually made between those two parties, whose interests
are by no means the same. The workmen desire to get as much,
the masters to give as little as possible. The former are disposed to
combine in order to raise, the latter in order to lower the wages of
labour.

It is not, however, difficult to foresee which of the two parties must,
upon all ordinary occasions, have the advantage in the dispute, and
force the other into a compliance with their terms. The masters,

1 The profit of the farmer is not so hibited in England and Germany. The

much ' a deduction from the produce of author is of course referring to manufac-

the labour/ as an anticipation of it. turing industry, for, with the exception

a These facts have been materially of the United Kingdom, the agricultural

modified by the adoption of the principle labourer throughout the greater part of Eu-

of co-operation in production, already ex- rope has a permanent interest in the soil.

70 THE NATURE AND CAUSES OF BOOK i.

being fewer in number, can combine much more easily; and the
law, besides, authorises, or at least does not prohibit their com-
binations, while it prohibits those of the workmen. We have no
Acts of Parliament against combining to lower the price of work ;
but many against combining to raise it. In all such disputes the
masters can hold out much longer. A landlord, a farmer, a master
manufacturer, or merchant, though they did not employ a single
workman, could generally live a year or two upon the stocks which
they have already acquired. Many workmen could not subsist
a week, few could subsist a month, and scarce any a year without
employment. In the long-run the workman may be as necessary to
his master as his master is to him; but the necessity is not so
immediate. 1

We rarely hear, it has been said, of the combinations of masters ;
though frequently of those of workmen. But whoever imagines,
upon this account, that masters rarely combine, is as ignorant of the
world as of the subject. Masters are always and everywhere in
a sort of tacit, but constant and uniform combination, not to raise
the wages of labour above .their actual rate. To violate this com-
bination is everywhere a most unpopular action, and a sort of
reproach to a master among his neighbours and equals. We seldom,
indeed, hear of this combination, because it is the usual, and one
may say, the natural state of things which nobody ever hears of.
Masters too sometimes enter into particular combinations to sink
the wages of labour even below this rate. These are always con-
ducted with the utmost silence and secrecy till the moment of
execution, and when the workmen yield, as they sometimes do,
without resistance, though severely felt by them, they arc never
heard of by other people. Such combinations, however, are
frequently resisted by a contrary defensive combination of the work-
men ; who sometimes too, without any provocation of this kind,
combine of their own accord to raise the price of their labour.
Their usual pretences are, sometimes the high price of provisions ;
sometimes the great profit which their masters make by their work.

1 The laws against the combination of Hence trades-unions and their organisa-

labourers, enacted in the first instance tion. For thn economical forces exercised

after the Great Plague of 1348, were re- by trades-unions, see the Editor's Manual

pealed in 1824. The effect of this repeal of Political Economy, chap. 9; for the

has been to relieve the combinations of origin of the repressive laws referred to,

workmen from the penalties of the laws the Editor's History of Agriculture and

referred to, and from those of conspiracy. Prices, vol. i. chap. 15.

CHAP. vin. THE WEALTH OF NATIONS. 71

But whether their combinations be offensive or defensive, they are
always abundantly heard of. In order to bring the point to a speedy
decision, they have always recourse to the loudest clamour, and
sometimes to the most shocking violence and outrage. They are
desperate, and act with the folly and extravagance of desperate men,
who must either starve, or frighten their masters into an immediate
compliance with their demands. The masters upon these occasions
are just as clamorous upon the other side, and never cease to call aloud
for the assistance of the civil magistrate, and the rigorous execution
of those laws which have been enacted with so much severity against
the combinations of servants, labourers, and journeymen. The
workmen, accordingly, very seldom derive any advantage from the
violence of those tumultuous combinations, which, partly from the
interposition of the civil magistrate, partly from the superior steadi-
ness of the masters, partly from the necessity which the greater
part of the workmen are under of submitting for the sake of present
subsistence, generally end in nothing but the punishment or ruin
of the ringleaders.

But though in disputes with their workmen, masters must
generally have the advantage, there is however a certain rate below
which it seems impossible to reduce, for any considerable time, the
ordinary wages even of the lowest species of labour.

A man must always live by his work, and his wages must at
least be sufficient to maintain him. They must even upon most
occasions be somewhat more ; otherwise it would be impossible for
him to bring up a family, and the race of such workmen could not
last beyond the first generation. 1 Mr. Cantillon seems, upon this
account, to suppose that the lowest species of common labourers
must everywhere earn at least double their own maintenance, in
order that one with another they may be enabled to bring up two
children ; the labour of the wife, on account of her necessary attend-
ance on the children, being supposed no more than sufficient to
provide for herself. But one-half the children born, it is computed,
die before the age of manhood. The poorest labourers, therefore,
according to this account, must, one with another, attempt to rear
at least four children, in order that two may have an equal chance

1 ' En tout genre de travail il doit arriver saire pour lui procurer sa subsistance.'
et il arrive en effet que le salaire de Turgot, 6.
Touvrier se borne a ce qui lui est

72 THE NATURE AND CA USES OF BOOK i.

of living to that age. But the necessary maintenance of four
children, it is supposed, may be nearly equal to that of one man.
The labour of an able-bodied slave, the same author adds, is com-
puted to be worth double his maintenance ; and that of the meanest
labourer, he thinks, cannot be worth less than that of an able-
bodied slave. Thus far at least seems certain, that, in order to
bring up a family, the labour of the husband and wife together
must, even in the lowest species of common labour, be able to
earn something more than what is precisely necessary for their
own maintenance ; but in what proportion, whether in that above
mentioned, or in any other, I shall not take upon me to determine.

There are certain circumstances, however, which sometimes give
the labourers an advantage, and enable them to raise their wages
considerably above this rate; evidently the lowest which is con-
sistent with common humanity.

When in any country the demand for those who live by wages
labourers, journeymen, servants of every kind is continually in-
creasing; when every year furnishes employment for a greater
number than had been employed the year before, the workmen have
no occasion to combine in order to raise their wages. The scarcity
of hands occasions a competition among masters, who bid against
one another, in order to get workmen, and thus voluntarily break
through the natural combination of masters not to raise wages. 1

The demand for those who live by wages, it is evident, cannot
increase but in proportion to the increase of the funds which are
destined for the payment of wages. These funds are of two kinds ;
first, the revenue which is over and above what is necessary for
the maintenance ; and, secondly, the stock which is over and above
what is necessary for the employment of their masters.

When the landlord, annuitant, or moneyed man has a greater
revenue than what he judges sufficient to maintain his own family,
he employs either the whole or a part oF the surplus in maintaining
one or more menial servants. Increase this surplus, and he will
naturally increase the number of those servants.

1 This phenomenon was exhibited in labour, and by a rapid migration of

Lancashire. A century ago, this county labourers from the over-populous South,

was one of the poorest in England, now, Hence the regulations of the law of

owing to its manufacturing industry, it is, parochial settlement were found super

according to acreage, second only to fluous in these districts, and wages in-

Middlesex. This change was accom- creased with the growth of industry.
panied by a continuous demand for

CHAP. vm. THE WEALTH OF NATIONS. 73

When an independent workman, such as a weaver or shoe-maker,
has got more stock than what is sufficient to purchase the materials
of his own work and to maintain himself till he can dispose of it,
he naturally employs one or more journeymen with the surplus, in
order to make a profit by their work. Increase this surplus, and he
will naturally increase the number of his journeymen.

The demand for those who live by wages, therefore, necessarily
increases with the increase of the revenue and stock of every country,
and cannot possibly increase without it. The increase of revenue
and stock is the increase of national wealth. The demand for those
who live by wages, therefore, naturally increases with the increase
of national wealth, and cannot possibly increase without it.

It is not the actual greatness of national wealth, but its continual
increase, which occasions a rise in the wages of labour. It is not,
accordingly, in the richest countries, but in the most thriving, or
in those which are growing rich the fastest, that the wages of
labour are highest. England is certainly, in the present times,
a much richer country than any part of North America. The
wages of labour, however, are much higher in North America than
in any part of England. In the province of New York, common
labourers earn* three shillings and sixpence currency, equal to two
shillings sterling, a day; ship carpenters, ten shillings and sixpence
currency, with a pint of rum worth sixpence sterling, equal in all
to six shillings and sixpence sterling ; house carpenters and brick-
layers, eight shillings currency, equal to four shillings and sixpence
sterling; journeymen tailors, iive shillings currency, equal to about
two shillings and tenpence sterling. These prices are all above the
London price ; the wages are said to be as high in the other colonies
as in New York. The price of provisions is everywhere in North
America much lower than in England. A dearth has never been
known there. In the worst seasons, they have always had a suffi-
ciency for themselves, though less for exportation. If the money
price of labour, therefore, be higher than it is anywhere in the
mother country, its real price, the real command of the neces-
saries and conveniences of life which it conveys to the labourer, must
be higher in a still greater proportion.

But though North America is not yet so rich as England, it is
much more thriving, and advancing with much greater rapidity to
* This was written in 1773, before the commencement of the present disturbances.

74 THE NATURE AND CAUSES OF BOOK i.

the further acquisition of riches. The most decisive mark of the
prosperity of any country is the increase of the number of its
inhabitants. In Great Britain, and most other European countries,
they are not supposed to double in less than five hundred years.
In the British colonies in North America, it has been found that
they double in twenty or five-and-twenty years. Nor in the present
times is this increase principally owing to the continual importation
of new inhabitants, but to the great multiplication of the species.
Those who live to old age, it is said, frequently see there from fifty
to a hundred, and ; sometimes many more, descendants from their
own body. Labour is there so well rewarded that a numerous family
of children, instead of being a burden, is a source of opulence and
prosperity to parents. The labour of each child, before it can leave
their house, is computed to be worth a hundred pounds clear gain
to them. A young widow with four or five young children, who,
among the middling or inferior ranks of people in Europe, would
have so little chance for a second husband, is there frequently
courted as a sort of fortune. The value of children is the greatest
of all encouragements to marriage. We cannot, therefore, wonder
that the people in North America should generally marry very
young. Notwithstanding the great increase occasioned by such
early marriages, there is a continual complaint of the scarcity of
hands in North America. The demand for labourers, the funds
destined for maintaining them, increase, it seems, still faster than
they can find labourers to employ. 1

Though the wealth of a country should be very great, yet if it
has been long stationary, we must not expect to find the wages of
labour very high in it. The funds destined for the payment of
wages, the revenue and stock of its inhabitants, may be of the
greatest extent, but if they have continued for several centuries of
the same, or very nearly of the same extent, the number of labourers
employed every year could easily supply, and even more than
supply, the number wanted the following year. There could seldom

1 In 1870, the population of the United tionate value of each child when Adam

States was 38,205,598 ; in 1879, that Smith wrote was 100 (and there is rea-

of the United Kingdom was estimated at son to think that the present value is much

34,156,123. The growth of the Union has greater), the annual immigration to the

been aided by emigrants from Europe, United States represents a voluntary

who settled in the States in the eleven tribute paid from the resources of the

years 1868-1878 at the average rate of Old World to the American Union, and

283,760 a year. If therefore the propor- amounting to nearly 30,000,000 a year.

CHAP. vin. THE WEALTH OF NATIONS. 75

be any scarcity of hands, nor could the masters be obliged to bid
against one another in order to get them. The hands, on the con-
trary, would, in this case, naturally multiply beyond their employ-
ment. There would be a constant scarcity of employment, and the
labourers would be obliged to bid against one another in order to
get it. 1 If in such a country the wages of labour had ever been
more than sufficient to maintain the labourer, and to enable him to
bring up a family, the competition of the labourers and the interest
of the masters would soon reduce them to this lowest rate which is
consistent with common humanity. China has been long one of
the richest, that is, one of the most fertile, best cultivated, most
industrious, and most populous countries in the world. It seems,
however, to have been long stationary. Marco Polo, who visited it
more than five hundred years ago, describes its cultivation, industry,
and populousness, almost in the same terms in which they are de-
scribed by travellers in the present times. It had perhaps, even
long before his time, acquired that full complement of riches which
the nature of its laws and institutions permits it to acquire. The
accounts of all travellers, inconsistent in many other respects, agree
in the low wages of labour, and in the difficulty which a labourer
finds in bringing up a family in China. If by digging the ground
a whole day he can get what will purchase a small quantity of rice
in the evening, he is contented. The condition of artificers is, if
possible, still worse. Instead of waiting indolently in their work-
houses, for the calls of their customers, as in Europe, they are con-
tinually running about the streets with the tools of their respective
trades, offering their service, and as it were begging employment.
The poverty of the lower ranks of people in China far surpasses that
of the most beggarly nations in Europe. In the neighbourhood of
Canton many hundred, it is commonly said, many thousand families
have no habitation on the land, but live constantly in little fishing
boats upon the rivers and canals. The subsistence which they find
there is so scanty that they are eager to fish up the nastiest garbage
thrown overboard from any European ship. Any carrion, the

1 Tliis is the germ of the Malthusian gree at least, the state of things in the

theory of population. But it should be United Kingdom when Malthus wrote,

observed that Smith, with his customary if indeed, during the first ten years of the

sagacity, puts a condition on his hypo- Continental War, it was not on the whole

thesis, that the wealth of a country should retrograde,
be stationary. This was, in great de-

76 THE NATURE AND CAUSES OF BOOK i.

carcase of a dead dog or cat, for example, though half putrid and
stinking, is as welcome to them as the most wholesome food to the
people of other countries. Marriage is encouraged in China, not
by the profitableness of children, but by the liberty of destroying
them. In all great towns several are every night exposed in the
street, or drowned like puppies in the water. The performance of
this horrid office is even said to be the avowed business by which
some people earn their subsistence.

China, however, though it may perhaps stand still, does not seem
to go backwards. Its towns are nowhere deserted by their in-
habitants. The lands which had once been cultivated are nowhere
neglected. The same or very nearly the same annual labour must
therefore continue to be performed, and the funds destined for main-
taining it must not, consequently, be sensibly diminished. The
lowest class of labourers, therefore, notwithstanding their scanty sub-
sistence, must some way or another make shift to continue their race
so far as to keep up their usual numbers.

But it would be otherwise in a country where the funds destined
for the maintenance of labour were sensibly decaying. Every year
the demand for servants and labourers would, in all the different
classes of employments, be less than it had been the year before.
Many who had been bred in the superior classes, not being able to
find employment in their own business, would be glad to seek it in
the lowest. The lowest class being not only overstocked with its
own workmen, but with the overflowings of all the other classes,
the competition for employment would be so great in it, as to reduce
the wages of labour to the most miserable and scanty subsistence of
the labourer. Many would not be able to find employment even
upon these hard terms, but would either starve, or be driven to
seek a subsistence either by begging, or by the perpetration perhaps
of the greatest enormities. Want, famine, and mortality would
immediately prevail in that class, and from thence extend them-
selves to all the superior classes, till the number of inhabitants in
the country was reduced to what could easily be maintained by the
revenue and stock which remained in it, and which had escaped either
the tyranny or calamity which had destroyed the rest. This per-
haps is nearly the present state of Bengal, and of some other of the
English settlements in the East Indies. In a fertile country which
had before been much depopulated, where subsistence, consequently,

CHAP. vin. THE WEALTH OF NATIONS. 77

should not be very difficult, and where, notwithstanding, three or
four hundred thousand people die of hunger in one year, we may be
assured that the funds destined for the maintenance of the labour-
ing poor are fast decaying. The difference between the genius of
the British constitution which protects and governs North America,
and that of the mercantile company which oppresses and domineers
in the East Indies, cannot perhaps be better illustrated than by the
different state of those countries. 1

The liberal reward of labour, therefore, as it is the necessary
effect, so it is the natural symptom of increasing national wealth.
The scanty maintenance of the labouring poor, on the other hand,
is the natural symptom that things are at a stand, and their
starving condition that they are going fast backwards.

In Great Britain the wages of labour seem, in the present times,
to be evidently more than what is precisely necessary to enable
the labourer to bring up a family. In order to satisfy ourselves
upon this point it will not be necessary to enter into any tedious
or doubtful calculation of what may be the lowest sum upon which
it is possible to do this. There are many plain symptoms that
the wages of labour are nowhere in this country regulated by this
lowest rate which is consistent with common humanity.

First, in almost every part of Great Britain there is a distinction,
even in the lowest species of labour, between summer and winter
wages. Summer wages are always highest. But on account of
the extraordinary expense of fuel, the maintenance of a family
is most expensive in winter. Wages, therefore, being highest
when this expense is lowest, it seems evident that they are not
regulated by what is necessary for this expense ; but by the
quantity and supposed value of the work. A labourer, it may
be said indeed, ought to save part of his summer wages in order
to defray his winter expense; and that through the whole year
they do not exceed what is necessary to maintain his family
through the whole year. A slave, however, or ono absolutely

1 Whenever the inhabitants of any other roots. The English labourer is

country are content to live on the grievously improvident, but as he lives

cheapest kind of food, they are always, on the clearest kind of vegetable food, he

however thrifty they may be, within risk of has never experienced actual famine since

famine. This was the case with Belgium 1315-16. The Hindoos live on rice, the

and the Scotch Highlands, as well as cheapest and most precarious food in

with Ireland, the inhabitants of which tropical climates. Hence famines are

subsisted, in the main, on potatoes and periodical or endemic in Hindostan.

78 THE NATURE AND CAUSES OF BOOK i,

dependent on us for immediate subsistence, would not be treated
in this manner. His daily subsistence would be proportioned to
his daily necessities.

Secondly, the wages of labour do not in Great Britain fluctuate
with the price of provisions. 1 These vary everywhere from year to
year, frequently from month to month. But in many places the
money price of labour remains uniformly the same sometimes for
half a century together. If in these places, therefore, the labouring
poor can maintain their families in dear years, they must be at
their ease in times of moderate plenty, and in affluence in those
of extraordinary cheapness. The high price of provisions during
these' ten years past has not in many parts of the kingdom been
accompanied with any sensible rise in the money price of labour.
It has, indeed, in some ; owing probably more to the increase of
the demand for labour than to that of the price of provisions.

Thirdly, as the price of provisions varies more from year to year
than the wages of labour, so, on the other hand, the wages of
labour vary more from place to place than the price of provisions.
The prices of bread and butcher's-meat are generally the same, or
very nearly the same, through the greater part of the United
Kingdom. These and most other things which are sold by retail,
the way in which the labouring poor buy all things, are generally
fully as cheap or cheaper in great towns than in the remoter parts
of the country, for reasons which I shall have occasion to explain
hereafter. But the wages of labour in a great town and its
neighbourhood are frequently a fourth or a fifth part, twenty or
five and twenty per cent, higher than at a few miles distance.
Eighteenpence a day may be reckoned the common price of labour
in London and its neighbourhood. At a few miles distance it falls
to fourteen and fifteen pence. Tenpence may be reckoned its price
in Edinburgh and its neighbourhood. At a few miles distance it
falls to eightpence, the usual price of common labour through the

1 This is a most important rule. One home consumer. But the most serious

of the stock arguments against the aban- injury it did was to the labourer, whose

donment of protection to home manu- wages did not increase under the impost,

factures, was the high price of provisions, The delusion however that cheap food

and, as was supposed, the consequent involved low wages occupied many of

high price of labour. The artificial the most intelligent of the working classes

scarcity of the corn laws inflicted no from 1841 to 1846, and made them averse

doubt an injury on the manufacturer, or indifferent to the repeal of the corn

by checking his foreign trade, and by laws,
limiting the purchasing powers of the

CHAP. vin. THE WEALTH OF NATIONS. 79

greater part of the low country of Scotland, where it varies a good
deal less than in England. 1 Such a difference of prices, which it
seems is not always sufficient to transport a man from one parish
to another, would necessarily occasion so great a transportation
of the most bulky commodities, not only from one parish to
another, but from one end of the kingdom, almost from one end
of the world to the other, as would soon reduce them more nearly
to a level. After all that has been said of the levity and incon-
stancy of human nature, it appears evidently from experience that
a man is of all sorts of luggage the most difficult to be transported.
If the labouring poor, therefore, can maintain their families in those
parts of the kingdom where the price of labour is lowest, they must
be in affluence where it is highest.

Fourthly, the variations in the price of labour not only do not
correspond either in place or time with those in the price of pro-
visions, but they are frequently quite opposite.

Grain, the food of the common people, is dearer in Scotland than
in England, whence Scotland receives almost every year very large
supplies. But English corn must be sold dearer in Scotland, the
country to which it is brought, than in England, the country from
which it comes ; and in proportion to its quality it cannot be sold
dearer in Scotland than the Scotch corn that comes to the same
market in competition with it. 2 The quality of grain depends chiefly
upon the quantity of flour or meal which it yields at the mill, and
in this respect English grain is so much superior to the Scotch,
that, though often dearer in appearance, or in proportion to the
measure of its bulk, it is generally cheaper in reality, or in pro-
portion to its quality, or even to the measure of its weight. The
price of labour, on the contrary, is dearer in England than in
Scotland. If the labouring poor, therefore, can maintain their
families in the one part of the United Kingdom, they must be
in affluence in the other. Oatmeal indeed supplies the common
people in Scotland with the greatest and the best part of their
food, which is in general much inferior to that of their neighbours
of the same rank in England. This difference, however, in the

1 For the prices of labour, provisions, might be reversed, owing to the singular
&c., at or soon after the time in which growth of agricultural skill, and the
Adam Smith wrote, see Arthur Young's sensible customs under which land is let,
Tours. in Scotland.

2 At the present time this statement

80 THE NATURE AND CAUSES OF BOOK i.

mode of their subsistence is not the cause, but the effect, of the
difference in their wages ; though, by a strange misapprehension,
I have frequently heard it represented as the cause. 1 It is not
because one man keeps a coach while his neighbour walks a-foot,
that the one is rich and the other poor ; but because the one
is rich he keeps a coach, and because the other is poor he walks
a-foot.

During the course of the last century, taking one year with
another, grain was dearer in both parts of the United Kingdom
than during that of the present. This is a matter of fact which
cannot now admit* of any reasonable doubt ; and the proof of it
is, if possible, still more decisive with regard to Scotland than
with regard to England. It is in Scotland supported by the
evidence of the public fiars, annual valuations made upon oath,
according to the actual state of the markets, of all the different
sorts of grain in every different county of Scotland. If such
direct proof could require any collateral evidence to confirm it,
I would observe that this has likewise been the case in France,
and probably in most other parts of Europe. With regard to
France there is the clearest proof. But though it is certain that
in both parts of the United Kingdom grain was somewhat dearer
in the last century than in the present, it is equally certain that
labour was much cheaper. If the labouring poor, therefore, could
bring up their families then, they must be much more at their
ease now. In the last century, the most usual day-wages of
common labour through the greater part of Scotland were sixpence
in summer and fivepence in winter. Three shillings a week, the
same price very nearly, still continues to be paid in some parts
of the Highlands and Western Islands. Through the greater part
of the low country the most usual wages of common labour are now
eightpence a day; tenpence, sometimes a shilling about Edinburgh,
in the counties which border upon England, probably on account
of that neighbourhood, and in a few other places where there has
lately been a considerable rise in the demand for labour, about
Glasgow, Carron, Ayrshire, &c. In England the improvements
of agriculture, manufactures, and commerce began much earlier

- 1 From one point of view, the character is always a tendency that wages should

of the food consumed by the Scotch be degraded to the level of customary

peasant was the cause of his low wages, subsistence. But the custom once estab-

for when population is abundant, there lished, the cause becomes the effect.

CHAP. vin. TUE WEALTH OF NATIONS. 81

than in Scotland. The demand for labour, and consequently its
prico, must necessarily have increased with those improvements.
In the last century, accordingly, as well as in the present, the
wages of labour were higher in England than in Scotland. They
have risen too considerably since that time, though, on account
of the greater variety of wages paid there in different places, it
is more difficult to ascertain how much. In 1614, the pay of
a foot soldier was the same as in the present times, eightpence
a day. When it was first established it would naturally be regu-
lated by the usual wages of common labourers, the rank of people
from which foot soldiers are commonly drawn. Lord Chief Justice
Hales, who wrote in the time of Charles II, computes the neces-
sary expense of a labourer's family, consisting of six persons, the
father and mother, two children able to do something, and two
not able, at ten shillings a week, or twenty-six pounds a year.
If they cannot earn this by their labour, they must make it up,
he supposes, either by begging or stealing. He appears to have
inquired very carefully into this subject.* In 1688, Mr. Gregory
King, whose skill in political arithmetic is so much extolled by
Dr. Davenant, computed the ordinary income of labourers and
out-servants to be fifteen pounds a year to a family, which he
supposed to consist, one with another, of three and a half persons. 1
His calculation, therefore, though different in appearance, corre-
sponds very nearly at bottom with that of Judge Hales. Both
suppose the weekly expense of such families to be about twenty-
pence a head. Both the pecuniary income and expense of such
families have increased considerably since that time through the
greater part of the kingdom ; in some places more, and in some
less ; though perhaps scarce anywhere so much as some exaggerated
accounts of the present wages of labour have lately represented them
to the public. The price of labour, it must be observed, cannot be
ascertained very accurately anywhere, different prices being often
paid at the same place, and for the same sort of labour, not only
according to the different abilities of the workmen, but according
to the easiness or hardness of the masters. Where wages are not

* See his scheme for the maintenance Methods of Making a People Gainers in

of the poor, in Burn's History of the the Balance of Trade, Davenant's Works,

Poor-laws. edit 1771, vol. ii. p 184. Gregory King

1 The calculation can be founcf in was Lancaster Herald.
Davenant's Essay upon the Probable

VOL. I. G

82 THE NATURE AND CAUSES OF BOOK i.

regulated by law, all that we can pretend to determine is what are
the most usual ; and experience seems to show that law can never
regulate them properly, though it has often pretended to do so.

The real recompense of labour, the real quantity of the necessaries
and conveniences of life which it can procure to the labourer, has,
during the course of the present century, increased perhaps in a
still greater proportion than its money price. Not only grain has
become somewhat cheaper, but many other things from which the
industrious poor derive an agreeable and wholesome variety of food,
have become a great deal cheaper. Potatoes, for example, do not
at present, through the greater part of the kingdom, cost half the
price which they used to do thirty or forty years ago. The same
thing may be said of turnips, carrots, cabbages ; things which were
formerly never raised but by the spade, but which are now com-
monly raised by the plough. All sort of garden stuff too has
become cheaper. The greater part of the apples and even of the
onions consumed in Great Britain were in the last century im-
ported from Flanders. The great improvements in the coarser
manufactures of both linen and woollen cloth furnish the labourers
with cheaper and better clothing; and those in the manufactures
of the coarser metals, with cheaper and better instruments of trade,
as well as with many agreeable and convenient pieces of household
furniture. Soap, salt, candles, leather, and fermented liquors have,
indeed, become a good deal dearer; chiefly from the taxes which
have been laid upon them. The quantity of these, however, which
the labouring poor are under any necessity of consuming, is so very
small, that the increase in their price does not compensate the
diminution in that of so many other things. The common com-
plaint that luxury extends itself even to the lowest ranks of the
people, and that the labouring poor will not now be contented with
the same food, clothing, and lodging which satisfied them in former
times, may convince us that it is not the money price of labour
only, but its real recompense, which has augmented. 1

Is this improvement in the circumstances of the lower ranks
of the people to be regarded as an advantage or as an inconveniency
to the society ? The answer seems at first sight abundantly plain.

1 The picture which Smith was able situated, was grievously reversed after
to draw of the economical condition in the outbreak of the great Continental
which the peasantry of his own age were war. See Porter's Progress of the Nation.

CHAP. viii. THE WEALTH OF NATIONS. 83

Servants, labourers, and workmen of different kinds make up the
far greater part of every great political society. But what im-
proves the circumstances of the greater part can never be regarded
as an inconveniency to the whole. No society can surely be
flourishing and happy, of which the far greater part of the members
are poor and miserable. It is but equity, besides, that they who
feed, clothe, and lodge the whole body of the people, should have
such a share of the produce of their own labour as to be themselves
tolerably well fed, clothed, and lodged.

Poverty, though it no doubt discourages, does not always pre-
vent marriage. It seems even to be favourable to generation. A
half-starved Highland woman frequently bears more than twenty
children, while a pampered fine lady is often incapable of bearing
any, and is generally exhausted by two or three. Barrenness, so
frequent among women of fashion, is very rare among those of
inferior station. Luxury in the fair sex, while it enflames perhaps
the passion for enjoyment, seems always to weaken, and frequently
to destroy altogether, the powers of generation. 1

But poverty, though it does not prevent the generation, is
extremely unfavourable to the rearing of children. The tender
plant is produced, but in so cold a soil and so severe a climate
soon withers and dies. It is not uncommon, I have been fre-
quently told, in the Highlands of Scotland for a mother who has
borne twenty children not to have two alive. Several officers of
great experience have assured me, that so far from recruiting their
regiment, they have never been able to supply it with drums and
fifes from all the soldiers' children that were born in it. A greater
number of fine children, however, is seldom seen anywhere than
about a barrack of soldiers. Very few of them, it seems, arrive at
the age of thirteen or fourteen. In some places, one half the
children born die before they are four years of age ; in many places
before they are seven ; and in almost all places before they are
nine or ten. This great mortality, however, will everywhere be
found chiefly among the children of the common people, who
cannot afford to tend them with the same care as those of better
station. Though their marriages are generally more fruitful than
those of people of fashion, a smaller proportion of their children
arrive at maturity. In foundling hospitals, and among the children
1 See for a theory allied to this last, Doubleday's work on Population

-G a

84 THE NATURE AND CAUSES OF BOOK i.

brought up by parish charities, the mortality is still greater than
among those of the common people.

Every species of animals naturally multiplies in proportion to
the means of their subsistence, and no species can ever multiply
beyond it. But in civilized society it is only among the inferior
ranks of people that the scantiness of subsistence can set limits
to the further multiplication of the human species ; and it can do
so in no other way than by destroying a great part of the children
which their fruitful marriages produce. 1

The liberal rewarj} of labour, by enabling them to provide better
for their children, and consequently to bring up a greater number,
naturally tends to widen and extend those limits. It deserves to
be remarked too, that it necessarily does this as nearly as possible
in the proportion which the demand for labour requires. If this
demand is continually increasing, the reward of labour must
necessarily encourage in such a manner the marriage and multi-
plication of labourers as may enable them to supply that con-
tinually increasing demand by a continually increasing population.
If the reward should at any time be less than what was requisite
for this purpose, the deficiency of hands would soon raise it ; and
if it should at any time be more, their excessive multiplication
would soon lower it to this necessary rate. The market would
be so much understocked with labour in the one case, and so
much overstocked in the other, as would soon force back its price
to that proper rate which the circumstances of the society required.
It is in this manner that the demand for men, like that for any
other commodity, necessarily regulates the production of men;
quickens it when it goes on too slowly, and stops it when it
advances too fast. It is this demand which regulates and deter-
mines the state of propagation in all the different countries of the
world, in North America, in Europe, and in China ; which renders
it rapidly progressive in the first, slow and gradual in the second,
and altogether stationary in the last.

1 Population has a tendency to increase rective to excessive population is found

up to the menns of subsistence. But in famine. In other words, there may

Subsistence' is a relative expression, be a redundant population, ap.irt from

determined sometimes by the cheapest the physical chuck which Adam Smith

food procurable, sometimes by the ha- refers to, and on which Malthus dilated,

bitual comforts of the people. It is how- and this redundancy may characterise

ever only when the mass of a people the higher as well as the lower ranks

subsist on the cheapest food, that the cor- of a civilised society.

CHAP. VITI. THE WEALTH OF NATIONS. 85

The wear and tear of a slave, 1 it has been said, is at the expense
of his master ; but that of a free servant is at his own expense.
The wear and tear of the latter, however, is, in reality, as much
at the expense of his master as that of the former. The wages
paid to journeymen and servants of every kind must be such as
may enable them, one with another, to continue the race of
journeymen and servants, according- as the increasing, diminishing,
or stationary demand of the society may happen to require. But
though the wear and tear of a free servant be equally at the ex-
pense of his master, it generally costs him much less than that
of a slave. The fund destined for replacing or repairing, if I may
say so, the wear and tear of the slave, is commonly managed by
a negligent master or careless overseer. That destined for per-
forming the same office with regard to the free man, is managed
by the free man himself. The disorders which generally prevail
in the economy of the rich, naturally introduce themselves into
the management of the former: the strict frugality and parsi-
monious attention of the poor as naturally establish themselves in
that of the latter. Under such different management, the same
purpose must require very different degrees of expense to execute
it. It appears, accordingly, from the experience of all ages and
nations, I believe, that the work done by freemen comes cheaper
in the end than that performed by slaves. It is found to do so
even at Boston, New York, and Philadelphia, where the wages of
common labour are so very high.

The liberal reward of labour, therefore, as it is the effect of
increasing wealth, so it is the cause of increasing population. To
complain of it is fo lament over the necessary effect and cause
of the greatest public prosperity.

It deserves to be remarked, perhaps, that it is in the progressive
state, while the society is advancing to the further acquisition,
rather than when it has acquired its full complement of riches,
that the condition of the labouring poor, of the great body of the

1 There is another reason why slave time. It is of course also plain, that as

labour is costly. When the market for the slave h^s no motive to economise

the produce of slave labour is depressed, his labour, to do the greatest possible

or the produce itself is scanty, the cost work with the least possible exertion,

of the slave's maintenance falls wholly slave labour is always costly. Hence

on the owner; while in the case of free the labour of slaves is never advantageous,

labour it falls partly at least, if not except when the climate discourages free

wholly, on the labourer. In other words, labour, the produce is agricultural, and

slave labour cannot be worked at short fertile land is available in abundance.

86 THE NATURE AND CAUSES OF BOOK i.

people, seems to be the happiest and the most comfortable. It
is hard in the stationary, and miserable in the declining state.
The progressive state is in reality the cheerful and the hearty state
to all the different orders of society. The stationary is dull ; the
declining, melancholy.

The liberal reward of labour, as it encourages the propagation,
so it increases the industry of the common people. The wages
of labour are the encouragement of industry, which, like every
other human quality, improves in proportion to the encouragement
it receives. A plentiful subsistence increases the bodily strength
of the labourer, and the comfortable hope of bettering his condition,
and of ending his days perhaps in case and plenty, animates him
to exert that strength to the utmost. Where wages are high,
accordingly, we shall always find the workmen more active, dili-
gent, and expeditious, than where they are low ; in England, for
example, than in Scotland ; in the neighbourhood of groat towns,
than in remote country places. Some workmen, indeed, when
they can earn in four days what will maintain them through the
week, will be idle the other three. This, however, is by no means
the case with the greater part. Workmen, on the contrary, when
they are liberally paid by the piece, arc very apt to overwork them-
selves, and to ruin their health and constitution in a few years.
A carpenter in London, and in some other places, is not supposed
to last in his utmost vigour above eight years. Something of
the same kind happens in many other trades, in which the work-
men are paid by the piece ; as they generally are in manufac-
tures, and even in country labour, wherever wages are higher
than ordinary. Almost every class of artificers is subject to some
peculiar infirmity occasioned by excessive application to their
peculiar species of work. Ramazzini, 1 an eminent Italian phy-
sician, has written a particular book concerning such diseases.
We do not reckon our soldiers the most industrious set of people
among us. Yet when soldiers have been employed in some par-
ticular sorts of work, and liberally paid by the piece, their officers
have frequently been obliged to stipulate with the undertaker, that
they should not be allowed to earn above a certain sum every day,
according to the rate at which they were paid. Till this stipu-

1 A Treatise on the Diseases of Tradesmen, &c. It was translated from Latin into
English, and published in 1705.

CHAP. vui. THE WEALTH OF NATIONS. 87

lation was made, mutual emulation, and the desire of greater gain,
frequently prompted them to overwork themselves, and to hurt
their health by excessive labour. Excessive application during
four days of the week is frequently the real cause of the idleness
of the other three, so much and so loudly complained of. Great
labour, either of mind or body, continued for several days together,
is in most men naturally followed by a great desire of relaxation,
which, if not restrained by force or by some strong necessity, is
almost irresistible. It is the call of nature, which requires to be
relieved by some indulgence, sometimes of ease only, but sometimes
too of dissipation and diversion. If it is not complied with, the
consequences are often dangerous, and sometimes fatal, and such
as almost always, sooner or later, bring on the peculiar infirmity
of the trade. If masters would always listen to the dictates of
reason and humanity, they have frequently occasion rather to
moderate, than to animate the application of many of their work-
men. It will be found, I believe, in every sort of trade, that the
man who works so moderately, as to be able to work constantly,
not only preserves his health the longest, but, in the course of
the year, executes the greatest quantity of work. 1

In cheap years, it is pretended, workmen are generally more idle,
and in dear ones more industrious than ordinary. A plentiful sub-
sistence therefore, it has been concluded, relaxes, and a scanty one
quickens, their industry. That a little more plenty than ordinary
may render some workmen idle, cannot well be doubted ; but that
it should have this elfcct upon the greater part, or that men in
general should work better when they are ill fed than when they
are well fed, when they are disheartened than when they are in
good spirits, when they are frequently sick than when they are
generally in good health, seems not very probable. Years of
dearth, it is to be observed, are generally among the common
people years of sickness and mortality, which cannot fail to diminish
the produce of their industry.

In years of plenty, servants frequently leave their masters, and
trust their subsistence to what they can make by their own in-
dustry. But the same cheapness of provisions, by increasing the
fund which is destined for the maintenance of servants, encourages

1 The reasoning in the text has been Acts, and by the reasonable adoption of
verified by the experience of the Factory short hour work.

88 THE NATURE AND CAUSES OF BOOK i.

masters, farmers especially, to employ a greater number. Farmers
upon such occasions expect more profit from their corn by main-
taining a few more labouring servants, than by selling at a low
price in the market. The demand for servants increases, while
the number of those who offer to supply that demand diminishes.
The price of labour, therefore, frequently rises in cheap years.

In years of scarcity, the difficulty and uncertainty of subsistence
make all such people eager to return to service. But the high
price of provisions, by diminishing the funds destined for the main-
tenance of servants, disposes masters rather to diminish than to
increase the number of those they have. In dear years too, poor
independent workmen frequently consume the little stocks with
which they had used to supply themselves with the materials of
their work, and arc obliged to become journeymen for subsistence.
More people want employment than can easily get it ; many are
willing to take it upon lower terms than ordinary, and the wages of
both servants and journeymen frequently sink in dear years.

Masters of all sorts, therefore, frequently make better bargains
with their servants in dear than in cheap years, and find them more
humble and dependent in the former than in the latter. They
naturally, therefore, commend the former as more favourable to
industry. Landlords and farmers, besides, two of the largest classes
of masters, have another reason for being pleased with dear years.
The rents of the one and the profits of the other depend very much
upon the price of provisions. Nothing can be more absurd, however,
than to imagine that men in general should work less when they
work for themselves, than when they work for other people. A poor
independent workman will generally be more industrious than even
a journeyman who works by the piece. The one enjoys the whole
produce of his own industry; the other shares it with his master.
The one, in his separate independent state, is less liable to the
temptations of bad company, which in large manufactories so
frequently ruin the morals of the other. The superiority of the
independent workman over those servants who are hired by the
month or by the year, and whose wages and maintenance arc the
same whether they do much or do little, is likely to be still greater.
Cheap years tend to increase the proportion of independent worjk-
men to journeymen and servants of all kinds, and dear years to
diminish it.

CHAP. vin. THE WEALTH OF NATIONS.

89

A French author of great knowledge and ingenuity, M. Messance, 1
Receiver of the Taillies in the Election of St. Etienne, endeavours to
show that the poor do more work in cheap than in dear years, by
comparing the quantity and value of the goods made upon those
different occasions in three different manufactures ; one of coarse
woollens carried on at Elbeuf ; one of linen, and another of silk, both
which extend through the whole generality of Ilouen. It appears
from his account, which is copied from the registers of the public
offices, that the quantity and value of the goods made in all those
three manufactures has generally been -greater in cheap than in
dear years ; and that it has always been greatest in the cheapest,
and least in the dearest years. All the three seem to be stationary
manufactures, or which, though their produce may vary somewhat
from year to year, are upon the whole neither going backwards nor
forwards.

The manufacture of linen in Scotland, and that of coarse woollens
in the West Hiding of Yorkshire, are growing manufactures, of which
the produce is generally, though with some variations, increasing
both in quantity and value. Upon examining 1 , however, the
accounts which have been published of their annual produce, I have
not been able to observe that its variations have had any sensible
connexion with the clearness or cheapnesb of the seasons. In 1 740,
a year of great scarcity, both manufactures, indeed, appear to have
declined very considerably. But in 1 756, another year of great scarcity,
the Scotch manufacture made more than ordinary advances. The
Yorkshire manufacture, indeed, declined, and its produce did not rise
to what it had been in 1 755 till 1 766, after the repeal of the American
Stamp Act. In that and the following year it greatty exceeded what
it had ever been before, and it has continued to advance ever since.

The produce of all great manufactures for distant sale must
necessarily depend, not so much upon the clearness or cheapness of
the seasons in the countries where they are carried on, as upon the
circumstances which affect the demand in the countries where they
are consumed ; upon peace or war, upon the prosperity or declension
of other rival manufactures, and upon the good or bad humour of
their principal customers. A great part of the extraordinary work,
besides, which is probably done in cheap years, never enters the

1 Recherches sur la Population des G&iralite^ d'Auyergue, de Lyon, de Rouen.
Paris, 1766.

90 THE NATURE AND CAUSES OF BOOK i.

public registers of manufactures. The men servants who leave their
masters become independent labourers. The women return to their
parents, and commonly spin in order to make clothes for themselves
and their families. Even the independent workmen do not always
work for public sale, but are employed by some of their neighbours
in manufactures for family use. The produce of their labour, there-
fore, frequently makes no figure in those public registers of which
the records are sometimes published with so much parade, and
from which our merchants and manufacturers would often vainly
pretend to announce the prosperity or declension of the greatest
empires.

Though the variations in the price of labour not only do not
always correspond with those in the price of provisions, but arc
frequently quite opposite, we must not, on this account, imagine
that the price of provisions has no influence upon that of labour.
The money price of labour is necessarily regulated by two circum-
stances ; the demand for labour, and the price of the necessaries and
conveniences of life. The demand for labour, according as it happens
to be increasing, stationary, or declining, or to require an in-
creasing, stationary, or declining population, determines the quantity
of the necessaries and conveniences of life which must be given to
the labourer ; and the money price of labour is determined by what
is requisite for purchasing this quantity. Though the money price
of labour, therefore, is sometimes high where the price of provisions
is low, it would be still higher, the demand continuing the same, if
the price of provisions was high.

It is because the demand for labour increases in years of sudden
and extraordinary plenty, and diminishes in those of sudden and
extraordinary scarcity, that the money price of labour sometimes
rises in the one, and sinks in the other.

In a year of sudden and extraordinary plenty, there are funds in
the hands of many of the employers of industry, sufficient to main-
tain and employ a greater number of industrious people than had
been employed the year before ; and this extraordinary number caii-
iiot always be had. Those masters, therefore, who want more
workmen, bid against one another in order to get them, which
sometimes raises both the real and the money price of their labour.

The contrary of this happens in a year of sudden and extraordinary
scarcity. The funds destined for employing industry are less than

CHAP. virr. THE WEALTH OF NATIONS. 91

they had been the year before. A considerable number of people
are thrown out of employment, who bid against one another, in
order to get it, which sometimes lowers both the real and the money
price of labour. In 1740, a year of extraordinary scarcity, many
people were willing to work for bare subsistence. In the suc-
ceeding years of plenty, it was more difficult to get labourers and
servants.

The scarcity of a dear year, by diminishing the demand for
labour, tends to lower its price, as the high price of provisions tends
to raise it. The plenty of a cheap year, on the contrary, by in-
creasing the demand, tends to raise the price of labour, as the
cheapness of provisions tends to lower it. In the ordinary varia-
tions of the price of provisions, those two opposite causes seem to
counterbalance one another ; which is probably in part the reason
why the wages of labour are everywhere so much more steady and
permanent than the price of provisions.

The increase in the wages of labour necessarily increases the price
of many commodities, by increasing that part of it which resolves
itself into wages, and so far tends to diminish their consumption
both at home and abroad. The same cause, however, which raises
the wages of labour, the increase of stock, tends to increase its pro-
ductive powers, and to make a smaller quantity of labour produce
a greater quantity of work. 1 The owner of the stock which employs
a great number of labourers, necessarily endeavours, for his own
advantage, to make such a proper division and distribution of
employment, that they may be enabled to produce the greatest
quantity of work possible. For the same reason, he endeavours to
supply them with the best machinery which either he or they can
think of. What takes place among the labourers in a particular
workhouse, takes place, for the same reason, among those of a great
society. The greater their number, the more they naturally divide
themselves into different classes and subdivisions of employment.

1 The latter cause is, however, in our producer strives to reduce the charges

day at least, incomparably more operative. contained in the most costly part of his

High and low prices of labour do not of product, so he attempts to supplement

course mean dear and cheap labour, for this kind of labour by machinery. It is

labour may be highly paid and yet cheap, obvious therefore that mechanical expe-

scantily paid and dear. But the effec- dients are always most eagerly sought out

tjveness of labour does bear on produc- and applied in substitution for that labour

tion and prices. If labour be effective, it which is most costly,
is naturaJly highly paid. But just as a

92 THE NATURE AND CAUSES OF BOOK i.

More heads are occupied in inventing the most proper machinery
for executing the work of each, and it is, therefore, more likely
to be invented. There are many commodities, therefore, which, in
consequence of those improvements, come to be produced by so
much less labour than before, that the increase of its price is more
than compensated by the diminution of its quantity.

CHAPTER IX.

OF THE PROFITS OF STOCK.

THE rise and fall in the profits of stock depend upon the same
causes with the rise and fall in the wages of labour, the
increasing or declining state of the wealth of the society ; but those
causes afiect the one and the other very differently.

The increase of stock, which raises wages, tends to lower profit.
When the stocks of many rich merchants are turned into the
same trade, their mutual competition naturally tends to lower its
profit ; and when there is a like increase of stock in all the different
trades carried on in the same society, the same competition must
produce the same effect in them all. 1

It is not easy, it has already been observed, to ascertain what are
the average wages of labour even in a particular place, and at a par-
ticular time. We can, even in this case, seldom determine more than
what are the most usual wages. But even this can seldom be done
with regard to the profits of stock. Profit is so very fluctuating,
that the person who carries on a particular trade cannot always tell
you himself what is the average of his annual profit. It is affected,
not only by every variation of price in the commodities which he
deals in, but by the good or bad fortune both of his rivals and of
his customers, and by a thousand other accidents to which goods

1 The rate of profit is not lowered by termined by the abundance or scarcity of

the competition of capitals, but by the money. Whatever profit contains be-

greater accumulation of capital and the yond interest, is, as I have said, the

diminished demand for it. Wages may wages of superintendence, and this part

be high, and profits high, because the of profit will be determined by the same

profitable employments of capital may be causes uhich determine the wages of

numerous. Taxation may be high, and labour in particular callings, that is to

profits may still be high, for the same say, by the amount of competition to

reason. Rates of interest are plainly de- which such callings are subject,

CHAP. ix. THE WEALTH OF NATIONS. 93

when carried either by sea or by land, or even when stored in a
warehouse, are liable. It varies, therefore, not only from year to
year, but from day to day, and almost from hour to hour. To
ascertain what is the average profit of all the different trades carried
on in a great kingdom, must be much more difficult; and to judge
of what it may have been formerly, or in remote periods of time,
with any degree of precision, must be altogether impossible.

But though it may be impossible to determine, with any degree of
precision, what are or were the average profits of stock, cither in
the present or in ancient times, some notion may be formed of them
from the interest of money. It may be laid down as a maxim, that
wherever a great deal can be made by the use of money, a great
deal will commonly be given for the use of it ; and that wherever
little can be made by it, less will commonly be given for it. Accord-
ing, therefore, as the usual market rate of interest varies in any
country, we may be assured that the ordinary profits of stock must
vary with it, must sink as it sinks, and rise as it rises. The pro-
gress of interest, therefore, may lead us to form some notion of the
progress of profit.

By the 37th of Henry VIII all interest above ten per cent,
was declared unlawful. More, it seems, had sometimes been taken
before that. In the reign of Edward VI religious zeal prohibited
all interest. This prohibition, however, like all others of the same
kind, is said to have produced no effect, and probably rather in-
creased than diminished the evil of usury. The statute of Henry
VIII was revived by the i v 3th of Elizabeth, cap. 8, (ind ten per
cent, continued to be the legal rate of interest till the 2ist of
James I, when it was restricted to eight per cent. It was reduced
to six per cent, soon after the Restoration, and by the I2th of Queen
Anne to five per cent. All these different statutory regulations
seem to have been made with great propriety. 1 They seem to have
followed and not to have gone before the market rate of interest, or

1 The wisdom of attempting to regulate actually assisted the tourer against his

the rate of interest by legal enactments debtor, since debtors will borrow, and

was affirmed almost universally in Adam must needs compensate their creditors

Smith's time. At the present day, it is for the disrepute and risk which accom-

seen to be as unreasonable as it is to fix pany a breach of the law. The attack

any other price, and it has been found on the existing system was ably coii-

out that the plea commonly alleged for ducted by Bentham, in his defence of

the restriction, that it was desirable to usury; and a few years ago the whole

protect society against usurers, was not fabric of the usury laws was swept

only false, but that the legal restriction away.

94 THE NATURE AND CAUSES OF BOOK i.

the rate at which people of good credit usually borrowed. Since
the time of Queen Anne, five per cent, seems to have been rather
above than below the market rate. Before the late war, the govern-
ment borrowed at three per cent. ; and people of good credit in the
capital, and in many other parts of the kingdom, at three and a
half, four, and four and a half per cent.

Since the time of Henry VIII l the wealth and revenue of the
country have been continually advancing, and, in the course of
their progress, their pace seems rather to have been gradually
accelerated than retarded. They seem, not only to have been
going on, but to have been going on faster and faster. The wages
of labour have been continually increasing during the same period,
and in the greater part of the different brandies of trade and
manufactures the profits of stock have been diminishing.

It generally requires a greater stock to carry on any sort of trade
in a great town than in a country village. The great stocks em-
ployed in every branch of trade, and the number of rich competitors,
generally reduce the rate of profit in the former below what it is in
the latter. But the wages of labour are generally higher in a great
town than in a country village. In a thriving town the people
who have great stocks to employ, frequently cannot get the number
of workmen they want, and therefore bid against one another in
order to get as many as they can, which raises the wages of labour
and lowers the profits of stock. In the remote parts of the country
there is frequently not stock sufficient to employ all the people, who
therefore bid against one another in order to get employment, which
lowers the wages of labour and raises the profits of stock.

In Scotland, though the legal rate of interest is the same as in
England, the market rate is rather higher. People of the best credit
there seldom borrow under five per cent. Even private bankers in
Edinburgh give four per cent, upon their promissory notes, of which
payment either in whole or in part may be demanded at pleasure.
Private bankers in London give no interest for the money which is
deposited with them. There are few trades which cannot be carried
on with a smaller stock in Scotland than in England. The common
rate of profit, therefore, must be somewhat greater. The wages of
labour, it has already been observed, are lower in Scotland than in
England. The country too is not only much poorer, but the steps

1 It is more correct to say, since the conclusion of Elizabeth's reign.

CHAP. ix. THE WEALTH OF NATIONS. 95

by which it advances to a better condition, for it is evidently ad-
vancing, seem to be much slower and more tardy. 1

The legal rate of interest in France has not, during the course of
the present century, been always regulated by the market rate.*
In 1720 interest was reduced from the twentieth to the fiftieth
penny, or from five to two per cent. In 1724 it was raised to the
thirtieth penny, or to 3^ per cent. In 1725 it was again raised to
the twentieth penny, or to five per cent. In 1766, during the
administration of M. Laverdy, it was reduced to the twenty-fifth
penny, or to four per cent. The Abbe Terray raised it afterwards
to the old rate of five per cent. The supposed purpose of many of
those violent reductions of interest was to prepare the way for
reducing that of the public debts ; a purpose which has sometimes
been executed. France is perhaps in the present times not so rich
a country as England ; and though the legal rate of interest has in
France frequently been lower than in England, the market rate has
generally been higher ; for there, as in other countries, they have
several very safe and easy methods of evading the law. The profits
of trade, I have been assured by British merchants who had traded
in both countries, are higher in France than in England; and it is
no doubt upon this account that many British subjects choose rather
to employ their capitals in a country where trade is in disgrace than
in one where it is highly respected. The wages oflabour are lower
in France than in England. When you go from Scotland to Eng-
land, the difference which you may remark between the dress and
countenance of the common people in the one country and in the
other sufficiently indicates the difference in their condition. The
contrast is still greater when you return from France. France,
though no doubt a richer country than Scotland, seems not to be
going forward so fast. It is a common and even a popular opinion
in the country that it is going backwards ; an opinion which, I
apprehend, is ill founded even with regard to France, but which
nobody can possibly entertain with regard to Scotland, \vho sees the
country now and who saw it twenty or thirty years ago.

1 Up to the conclusion of the eighteenth passim. For an exact account of the
century Scotland contributed very little growth of the Scottish linen manufacture,
to the public revenue, the produce of the see The Linen Trade, Ancient and Mo-
customs being absorbed in local charges dern, by Mr. Alexander Warden,
and the cost of collection. See Mac- * See Denisart, Article Taux des Tn-
pherson's History of Commerce, vol. iv. terets, torn. iii. p. 18.

96 THE NATURE AND CAUSES OF BOOK i.

The province of Holland, on the other hand, in proportion to the
extent of its territory and the number of its people, is a richer
country than England. The government there borrow at two per
cent., and private people of good credit at three. 1 The wages of
labour are said to be higher in Holland than in England, and the
Dutch, it is well known, trade upon lower profits than any people
in Europe. The trade of Holland, it has been pretended by some
people, is decaying, and it may perhaps be true that some particular
branches of it are so. But these symptoms seem to indicate suffi-
ciently that there is no general decay. When profit diminishes,
merchants are very apt to complain that trade decays ; though the
diminution of profit is the natural effect of its prosperity, or of a
greater stock being employed in it than before. During the late
war the Dutch gained the whole carrying trade of France, of which
they still retain a very large share. The great property which they
possess both in the French and English funds, about forty millions,
it is said, in the latter (in which I suspect, however, there is a con-
siderable exaggeration) j 2 the great sums which they lend to private
people in countries where the rate of interest is higher than in their
own, arc circumstances which no doubt demonstrate the redundancy
of their stock, or that it has increased beyond what they can employ
with tolerable profit in the proper business of their own country :
but they do not demonstrate that that business has decreased. As
the capital of a private man, though acquired by a particular trade,
may increase beyond what he can employ in it, and yet that trade
continue to increase too ; so may likewise the capital of a great nation.

In our North American and West Indian colonies, not only the
wages of labour, but the interest of money, and consequently the
profits of stock, are higher than in England. In the different

1 .? hi 1 s k* * f P rofit in H lland is not easy to understand the connexion

ascribed, by Mr. Macculloch and others, between heavy taxation and low rates of

to the oppressiveness of taxation. But profit. A high rate of profit on a few

heavy taxation, if it be not compensated transactions is a poor substitute for a

by parsimony, has a tendency to heighten low rate of profit on a multitude of

the rate of profit, by diminishing the transactions.

amount of capital. It is more reasonable a Mr. Macculloch states, that in 1762

to conclude that the parsimony of the the amount of the public funds standing

Dutch led to the accumulation of capital, in the names of foreigners ,ind their agents

and that their wilful narrowing of the was nearly 15,000,000. In 1806 it was

market for Eastern produce, by limiting 18,598,606. It IH said by Mr. Fairman,

its annual amount artificially, induced a 'On the Funds,' that these investments

low rate of profit on the principal articles have rapidly declined since the ueace of

in which they traded. At any rate, it is 1815.

CHAP. ix. THE WEALTH OF NATIONS. 97

colonies both the legal and the market rate of interest run from
six to eight per cent. High wages of labour and high profits of
stock, however, are things, perhaps, which scarce ever go together,
except in the peculiar circumstances of new colonies. A new colony
must always for some time be more under-stocked in proportion to
the extent of its territory, and more under-peopled in proportion to
the extent .of its stock, than the greater part of other countries.
They have more land than they have stock to cultivate. What
they have, therefore, is applied to the cultivation only of what is
most fertile and most favourably situated, the lands near the sea
shore and along the banks of navigable rivers. Such land too is
frequently purchased at a price below the value even of its natural
produce. Stock employed in the -purchase and improvement of such
lands must yield a very large profit, and consequently afford to pay
a very large interest. Its rapid accumulation in so profitable an
employment enables the planter to increase the number of his hands
faster than he can find them in a new settlement. Those whom he
can find, therefore, are very liberally rewarded. As the colony in-
creases, the profits of stock gradually dimmish. When the most
fertile and best situated lands have been all occupied, less profit can
be made by the cultivation of what is inferior both in soil and
situation, and less interest can be afforded for the stock which is so
employed. In the greater part of our colonies, accordingly, both
the legal and the market rate of interest have been considerably
reduced during the course of the present century. As riches, im-
provement, and population have increased, interest has declined.
The wages of labour do not sink with the profits of stock. The
demand for labour increases with the increase of stock whatever be
its profits ; and after these arc diminished, stock may not only con-
tinue to increase, but to increase much faster than before. It is
with industrious nations who are advancing in the acquisition of
riches, as with industrious individuals, A great stock, though with
small profits, generally increases faster than a small stock with great
profits. Money, says the proverb, makes money. When you have
got a little, it is often easy to get more. The great difficulty is to
get that little. The connexion between the increase of stock and
that of industry, or of the demand for useful labour, has partly been
explained already, but will be explained more fully hereafter in
treating of the accumulation of stock.
VOL. i. H

98 THE NATURE AND CAUSES OF BOOK i.

The acquisition of new territory, or of new branches of trade, may
sometimes raise the profits of stock, and with them the interest of
money, even in a country which is fast advancing in the acquisition
of riches. 1 The stock of the country not being sufficient for the
whole accession of business, which such acquisitions present to the
different people among whom it is divided, is applied to those par-
ticular branches only which afford the greatest profit. Part of what
had before been employed in other trades, is necessarily withdrawn
from them, and turned into some of the new and more profitable
ones. In all those old trades, therefore, the competition comes to
be less than before. The market comes to be less fully supplied
with many different sorts of goods. Their price necessarily rises
more or less, and yields a greater profit to those who deal in them,
who can, therefore, afford to borrow at a higher interest. For some
time after the conclusion of the late war, not only private people of
the best credit, but some of the greatest companies in London, com-
monly borrowed at five per cent, who before that had not been used
to pay more than four, and four and a half per cent. The great
accession both of territory and trade, by our acquisitions in North
America and the West Indies, will sufficiently account for this,
without supposing any diminution in the capital stock of the society.
So great an accession of new business to be carried on by the old
stock must necessarily have diminished the quantity employed in a
groat number of particular branches, in which the competition being
less, the profits must have been greater. I shall hereafter have
occasion to mention the reasons which dispose me to believe that
the capital stock of Great Britain was not diminished even by the
enormous expense of the late war.

The diminution of the capital stock of the society, or of the
funds destined for the maintenance of industry, however, as it
lowers the wages of labour, so it raises the profits of stock, and
consequently the interest of money. By the wages of labour being
lowered, the owners of what stock remains in the society can bring
their goods at less expense to market than before, and less stock

1 Such events will certainly raise the to absorb capital, and so to arrest the fall

rate of profit. But so will also the ex- of profit. This opening up of new fields

tension of trade, and the occupation of of industrial enterprise constitutes the

regions hitherto uncultivated, uninha- real advantage which the discovery of

bited, or inhabited only by savage tribes. new gold-fields has conferred on the Old

kvery expansion of civilized society tends World.

CHAP. ix. THE WEALTH OF NATIONS. 99

being employed in supplying the market than before, they can sell
them dearer. Their goods cost them less, and they get more for
them. Their profits, therefore, being augmented at both ends, can
well afford a large interest. The great fortunes so suddenly and so
easily acquired in Bengal and the other British settlements in the
East Indies, may satisfy us that, as the wages of labour are very
low, so the profits of stock are very high in those ruined countries.
The interest of money is proportionably so. In Bengal, money is
frequently lent to the farmers at forty, fifty, and sixty per cent.,
and the succeeding crop is mortgaged for the payment. As the
profits which can afford such an interest must eat up almost the
whole rent of the landlord, so such enormous usury must in its turn
eat up the greater part of those profits. Before the fall of the
Roman republic a usury of the same kind seems to have been
common in the provinces, under the ruinous administration of their
proconsuls. The virtuous Brutus lent money at Cyprus at eight-
and-forty per cent., as we learn from the letters of Cicero. 1 ,

In a country which had acquired that full complement of riches
which the nature of its soil and climate and its situation with
respect to other countries allowed it to acquire, which could,
therefore, advance no further, and which was not going backwards,
both the wages of labour and the profits of stock would probably
be very low. In a country fully peopled in proportion to what
either its territory could maintain or its stock employ, the competi-
tion for employment would necessarily be so great as to reduce the
wages of labour to what was barely sufficient to keep up the
number of labourers, and, the country being already fully peopled,
that number could never be augmented. In a country fully stocked
in proportion to all the business it had to transact, as great a
quantity of stock would be employed in every particular branch as
the nature and extent of the trade would admit. The competition,
therefore, would everywhere be as great, and consequently the
ordinary profit as low as possible.

But perhaps no country has ever yet arrived at this degree of
opulence. China seems to have been long stationary, and had pro-
bably long ago acquired that full complement of riches which is

1 * Si Brutus putabit me quaternas que edixissem, 1 &c. Cicero, it will be
centesimas oportuisse decernere, qtii in seen, had fixed it at 12. Cic. ad Att. vi.
tota provincia singulas observarem, ita- I. 6.

II 2

100 THE NATURE AND CAUSES OF BOOK i.

consistent with the nature of its laws and institutions. But this
complement may be much inferior to what, with other laws and
institutions, the nature of its soil, climate, and situation might
admit of. A country whicli neglects or despises foreign commerce,
and which admits the vessels of foreign nations into one or two of
its ports only, cannot transact the same quantity of business which
it might do with different laws and institutions. In a country too,
where, though the rich or the owners of large capitals enjoy a
good deal of security, the poor or the owners of small capitals enjoy
scarce any, but arc liable, under the pretence of justice, to be
pillaged and plundered at any time by the inferior mandarins, the
quantity of stock employed in all the different branches of business
transacted within it can never be equal to what the nature and
extent of that business might admit. In every different branch,
the oppression of the poor must establish the monopoly of the rich,
who, by engrossing the whole trade to themselves, will be able to
make very large profits. Twelve per cent, accordingly is said to be
the common interest of money in China, and the ordinary profits of
stock must be sufficient to afford this large interest.

A defect in the law may sometimes raise the rate of interest
considerably above what the condition of the country, as to wealth
or poverty, would require. When the law does not enforce the
performance of contracts, it puts all borrowers nearly upon the
same footing with bankrupts or people of doubtful credit in better
regulated countries. 1 The uncertainty of recovering his money
makes the lender exact the same usurious interest which is usually
required from bankrupts. Among the barbarous nations who over-
run the western provinces of the Roman empire, the performance
of contracts was left for many ages to the faith of the contracting
parties. The courts of justice of their kings seldom intermeddled
in it. The high rate of interest which took place in those ancient
times may perhaps be partly accounted for from this cause.

When the law prohibits interest altogether, it does not prevent
it. Many people must borrow, and nobody will lend without such

1 Just as a country which does not bankrupts and thereby gives security to

enforce the performance of contracts fraud, checks commercial enterprise, dis-

voluntarily puts hindrances in the way courages saving, and raises the rate of

of lenders, and thus heightens the rate interest on all but the very best inercan-

of interest to borrowers ; so a country tile credit,
which exercises undue leniency towards

CHAP. ix. THE WEALTH OF NATIONS. 101

a consideration for the use of their money as is suitable, not only to
what can be made by the use of it, but to the difficulty and danger
of evading the law. The high rate of interest among all Mahometan
nations is accounted for by M. Montesquieu, 1 not from their poverty,
but partly from this, and partly from the difficulty of recovering
the money.

The lowest ordinary rate of profit must always be something
more than what is sufficient to compensate the occasional losses to
which every employment of stock is exposed. It is this surplus
only which is neat or clear profit. What is called gross profit
comprehends frequently, not only this surplus, but what is retained
for compensating such extraordinary losses. The interest which
the borrower can afford to pay is in proportion to the clear profit
only.

The lowest ordinary rate of interest must, in the same manner,
be something more than sufficient to compensate the occasional
losses to which lending, even with tolerable prudence, is exposed.
Were it not more, charity or friendship could be the only motives
for lending.

In a country which had acquired its full complement of riches,
where in every particular branch of business there was the greatest
quantity of stock that could be employed in it, as the ordinary rate
of clear profit would be very small, so the usual market rate of
interest which could be afforded out of it would be so low as to
render it impossible for any but the very wealthiest people to live
upon the interest of their money. All people of small or middling
fortunes would be obliged to superintend themselves the employ-
ment of their own stocks. It would be necessary that almost every
man should be a man of business, or engage in some sort of trade.
The province of Holland seems to be approaching near to this state.
It is there unfashionable not to be a man of business. Necessity
makes it usual for almost every man to be so, and custom every-
where regulates fashion. As it is ridiculous not to dress, so is it,
in some measure, not to be employed, like other people. As a man
of a civil profession seems awkward in a camp or a garrison, and is
even in some danger of being despised there, so does an idle man
among men of business.

The highest ordinary rate of profit may be such as, in the price

1 Esprit des Loix, xxii. 19.

102 THE NATURE AND CAUSES OF BOOK i.

of the greater part of commodities, eats up the whole of what
should go to the rent of the land, and leaves only what is sufficient
to pay the labour of preparing and bringing them to market,
according to the lowest rate at which labour can anywhere be paid,
the bare subsistence of the labourer. 1 The workman must always
have been fed in some way or other while he was about the work ;
but the landlord may not always have been paid. The profits of
the trade which the servants of the East India Company carry on
in Bengal may not perhaps be very far from this rate.

The proportion tvhieh the usual market rate of interest ought to
bear to the ordinary rate of clear profit, necessarily varies as profit
rises or falls. Double interest is in Great Britain reckoned, what
the merchants call, a good, moderate, reasonable profit ; terms
which I apprehend mean no more than a common and usual profit.
In a country where the ordinary rate of clear profit is eight or ten
per cent., it may be reasonable that one half of it should go to
interest, wherever business is carried on with borrowed money.
The stock is at the risk of the borrower, who, as it were, insures it
to the lender ; and four or five per cent, may, in the greater part of
trades, be both a sufficient profit upon the risk of this insurance,
and a sufficient recompense for the trouble of employing the stock.
But the proportion between interest and clear profit might not be
the same in countries where the ordinary rate of profit was either a
good deal lower, or a good deal higher. If it were a good deal
lower, one half of it perhaps could not be afforded for interest ; and
more might be afforded if it were a good deal higher.

In countries which are fast advancing to riches, the low rate of
profit may, in the price of many commodities, compensate the high
wages of labour, and enable those countries to sell as cheap as their
less thriving neighbours, among whom the wages of labour may be
lower.

In reality high profits tend much more to raise the price of work
than high wages. If in the linen manufacture, for example, the
wages of the different working people, the flax-dressers, the
spinners, the weavers, &c. should, all of them, be advanced two-

1 Very high rates of profit, except in seen, does not enter into price, but is

newly-settled countries, where, for other developed from the fact that the price of

causes, land is valueless, tend to enhance the product is in excess of the ordinary

rents. Illustrations of this fact are or average remuneration of the cost of

abundant and patent. Kent, as we have production.

CHAP. x. THE WEALTH OF NATIONS. 103

pence a day ; it would be necessary to heighten the price of a piece
of linen only by a number of twopences equal to the number of
people that had been employed about it, multiplied by the number
of days during which they had been so employed. That part of
the price of the commodity which resolved itself into wages would,
through all the different stages of the manufacture, rise only in
arithmetical proportion to this rise of wages. But if the profits of
all the different employers of those working people should be raised
five per cent., that part of the price of the commodity which
resolved itself into profit would, through all the different stages of
the manufacture, rise in geometrical proportion to this rise of profit.
The employer of the flax-dressers would in selling his flax require
an additional five per cent, upon the whole value of the material and
wages which he advanced to his \vorkmen. The employer of the
spinners would require an additional five per cent, both upon the
advanced price of the flax and upon the wages of the spinners.
And the employer of the weavers would require a like five per cent,
both upon the advanced price of the linen yarn and upon the wages
of the weavers. In raising the price of commodities the rise of
wages operates in the same manner as simple interest does in the
accumulation of debt. The rise of profit operates like compound
interest. Our merchants and master-manufacturers complain much
of the bad effects of high wages in raising the price, and thereby
lessening the sale of their goods both at home and abroad. They
say nothing concerning the bad effects of high profits. They are
silent with regard to the pernicious effects of their own gains.
They complain only of those of other people.

CHAPTER X.

OF WAGES AND PROFIT IN THE DIFFERENT EMPLOYMENTS OF
LABOUR AND STOCK.

THE whole of the advantages and disadvantages of the different
employments of labour and stock must, in the same neigh-
bourhood, be either perfectly equal or continually tending to equality.
If in the same neighbourhood there was any employment evidently
either more or less advantageous than the rest, so many people

104 THE NATURE AND CAUSES OF BOOK i.

would crowd into it in the one case, and so many would desert it
in the other, that its advantages would soon return to the level
of other employments. This at least would be the case in a society
where things were left to follow their natural course, where there
was perfect liberty, and where every man was perfectly free both
to choose what occupation he thought proper, and to change it
as often as he thought proper. Every man's interest would prompt
him to seek the advantageous, and to shun the disadvantageous
employment. 1

Pecuniary wages and profit, indeed, are everywhere in Europe
extremely different according to the different employments of
labour and stock. But this difference arises partly from certain
circumstances in the employments themselves, which, either really,
or at least in the imaginations of men, make up for a small
pecuniary gain in some, and counterbalance a great one in others ;
and partly from the policy of Europe, which nowhere leaves things
at perfect liberty.

The particular consideration of those circumstances and of that
policy will divide this chapter into two parts.

PART I.

Inequalities arising from the Nature of the Employments

themselves.

THE five -following are the principal circumstances which, so far
as I have been able to observe, make up for a small pecuniary
gain in some employments, and counterbalance a great one in
others : first, the agreeableness or disagreeableness of the employ-
ments themselves ; secondly, the easiness and cheapness, or the
difficulty and expense of learning them; thirdly, the constancy
or inconstancy of employment in them; fourthly, the small or
great trust which must be reposed in those who exercise them ;
and fifthly, the probability or improbability of success in them. 2

1 This reasoning applies also to such the profit obtained by each capitalist to

protected occupations as are not further the ordinary market rate,
characterised by a limitation of the 2 These circumstances are really redu-

number of persons engaged in them. cible to two, cost and risk ; the first,

If, for example, a manufacture be pro- third, and fifth of Smith's conditions

tected, the competition of capitalists for being relative to the element of risk, the

the profit thus heightened soon reduces second and fourth to that of cost. The

CHAP. x. THE WEALTH OF NATIONS. 105

First, The wages of labour vary with the ease or hardship, the
cleanliness or dirtiness, the honourableness or dishonourableness
of the employment. Thus, in most places, take the year round,
a journeyman tailor earns less than a journeyman weaver. His
work is much easier. A journeyman weaver earns less than a
journeyman smith. His work is not always easier, but it is much
cleanlier. A journeyman blacksmith, though an artificer, seldom
earns so much in twelve hours as a collier, who is only a labourer,
does in eight. His work is not quite so dirty, is less dangerous,
and is carried on in daylight and above ground. Honour makes
a great part of the reward of all honourable professions. In point
of pecuniary gain, all things considered, they are generally under-
recompensed, as I shall endeavour to show by and by. Disgrace
has the contrary effect. The trade of a butcher is a brutal and
an odious business ; but it is in most places more profitable than the
greater part of common trades. The most detestable of all employ-
ments, that of public executioner, is, in proportion to the quantity
of work done, better paid than any common trade whatever.

Hunting and fishing, the most important employments of man-
kind in the rude state of society, become in its advanced state
their most agreeable amusements, and they pursue for pleasure
what they once followed from necessity. In the advanced state
of society, therefore, they are all very poor people who follow
as a trade what other people pursue as a pastime. Fishermen
have been so since the time of Theocritus.^ A poacher is every-
where a very poor man in Great Britain. In countries where the
rigour of the law suffers no poachers, the licensed hunter is not
in a much better condition. The natural taste for those employ-
ments makes more people follow them than can live comfortably
by them, and the produce of their labour in proportion to its
quantity comes always too cheap to market to afford anything
but the most scanty subsistence to the labourers.

Disagreeableness and disgrace affect the profits of stock in the
same manner as the wages of labour. The keeper of an inn or

risk may be occasional, as in the case of or for securing the other element needed

a collier; or continuous, as in that of dry- for his occupation, that of credit or trust

grinders and needle-makers. The cost on the part of those who purchase his

too may be relative solely to the charges labour or its products,

incurred in making the labourer com- * See Idy Ilium xxi. 1. 16.
petent for that in which he is engaged,

106 TUE NATURE AND CAUSES OF BOOK i.

tavern, who is never master of his own house, and who is exposed
to the brutality of every drunkard, exercises neither a very agree-
able nor a very creditable business. But there is scarce any common
trade in which a small stock yields so great a profit.

Secondly, The wages of labour vary with the easiness and cheap-
ness, or the difficulty and expense of learning the business.

When any expensive machine is erected, the extraordinary work
to be performed by it before it is worn out, it must be expected,
will replace the capital laid out upon it, with at least the ordinary
profits. A man educated at the expense of much labour and time
to any of those employments which require extraordinary dexterity
and skill, may be compared to one of those expensive machines.
The work which he learns to perform, it must be expected, over
and above the usual wages of common labour, will replace to
him the whole expense of his education, with at least the ordinary
profits of an equally valuable capital. It must do this too in a
reasonable time, regard being had to the very uncertain duration
of human life, in the same manner as to the more certain duration
of the machine. 1

The difference between the wages of skilled labour and those of
common labour is founded upon this principle.

The policy of Europe considers the labour of all mechanics,
artificers, and manufacturers as skilled labour; and that of all
country labourers as common labour. It seems to suppose that
of the former to be of a more nice and delicate nature than that
of the latter. It is so perhaps in some cases ; but in the greater
part it is quite otherwise, as I shall endeavour to show by and
by. The laws and customs of Europe, therefore, in order to qualify
any person for exercising the one species of labour, impose the
necessity of an apprenticeship, though with different degrees of
rigour in different places. They leave the other free and open
to everybody. During the continuance of the apprenticeship, the
whole labour of the apprentice belongs to his master. In the
meantime he must, in many cases, be maintained by his parents
or relations, and in almost all cases must be clothed by them.

1 This statement of Adam Smith has levies equal rates from professional, ter-

not been carried out by succeeding eco- minable, and perpetual incomes ; for it

nonrists to its legitimate conclusions. It shows that such a scale of taxation takes

furnishes a complete condemnation of away from profits and capital in the first

that system of taxing incomes, which two cases, from profits only in the third.

CHAP. x. THE WEALTH OF NATIONS. 107

Some money, too, is commonly given to the master for teaching
him his trade. They who cannot give money, give time, or be-
come bound for more than the usual number of years ; a con-
sideration which, though it is not always advantageous to the
master, .on account of the usual idleness of apprentices, is always
disadvantageous to the apprentice. In country labour, on the
contrary, the labourer, while he is employed about the easier, learns
the more difficult parts of his business, and his own labour main-
tains him through all the different stages of his employment. It
is reasonable, therefore, that in Europe the wages of mechanics,
artificers, and manufacturers should be somewhat higher than
those of common labourers. They are so accordingly, and their
superior gains make them in most places be considered as a superior
rank of people. This superiority, however, is generally very small ;
the daily or weekly earnings of journeymen in the more common
sorts of manufactures, such as those of plain linen and woollen
cloth, computed at an average, are, in most places, very little more
than the day wages of common labourers. Their employment,
indeed, is more steady and uniform, and the superiority of their
earnings, taking the whole year together, maybe somewhat greater.
It seems evidently, however, to be no greater than what is suffi-
cient to compensate the superior expense of their education.

Education in the ingenious arts and in the liberal professions
is still more tedious and expensive. The pecuniary recompense,
therefore, of painters and sculptors, of lawyers and physicians,
ought to be much more liberal : and it is so accordingly.

The profits of stock seem to be very little affected by the easi-
ness or difficulty of learning the trade in which it is employed.
All the different ways in which stock is commonly employed in
great towns seem, in reality, to be almost equally easy and equally
difficult to learn. One branch, either of foreign or domestic trade,
cannot well be a much more intricate business than another.

Thirdly, The wages of labour in different occupations vary with
the constancy or inconstancy of employment.

Employment is much more constant in some trades than in
others. In the greater part of manufactures, a journeyman may
be pretty sure of employment almost every day in the year that
he is able to work. A mason or bricklayer, on the contrary,
can work neither in hard frost nor in foul weather, and his

108 THE NATURE AND CAUSES OF BOOK i.

employment at all other times depends upon the occasional calls
of his customers. He is liable, in consequence, to be frequently
without any. What he earns, therefore, while he is employed,
must not only maintain him while he is idle, but make him some
compensation for those anxious and desponding moments which
the thought of so precarious a situation must sometimes occasion.
When the computed earnings of the greater part of manufacturers,
accordingly, are nearly upon a level with the day- wages of common
labourers, those of masons and bricklayers are generally from one
half more to double those wages. Where common labourers earn
four and five shillings a week, masons and bricklayers frequently
earn seven and eight ; where the former earn six, the latter often
earn nine and ten ; and where the former earn nine and ten, as
in London, the latter commonly earn fifteen and eighteen. 1 No
species of skilled labour, however, seems more easy to learn than
that of masons and bricklayers. Chairmen in London, during
the summer season, are said sometimes to be employed as brick-
layers. The high wages of those workmen, therefore, are not so
much the recompense of their skill, as the compensation for the
inconstancy of their employment.

A house carpenter seems to exercise rather a nicer and more
ingenious trade than a mason. In most places, however, for it
is not universally so, his day-wages are somewhat lower. His
employment, though it depends much, does not depend so entirely
upon the occasional calls of his customers ; and it is not liable to
be interrupted by the weather.

When the trades which generally afford constant employment,
happen in a particular place not to do so, the wages of the work-
men always rise a good deal above their ordinary proportion to
those of common labour. In London almost all journeymen arti-
ficers are liable to be called upon and dismissed by their masters
from day to day, and from week to week, in the same manner
as day labourers in other places. The lowest order of artificers,

1 The proportion is much more in that the system of trades-unions is most

favour of the bricklayer and mason at effective, and the spirit of such combina-

the present time. This result is no doubt tions most dominant and obstinate. The

due to trades-unions, which can heighten skill of a bricklayer or mason is one of

the rate of wages in such kinds of labour the very easiest attainable. It is said

as are not liable to foreign competition, that an unskilled able-bodied labourer

and which are further protected within can become a skilled mason or brick-

the country itself by apprenticeships, layer after a fortnight's training.
It is in the building trades, therefore,

CHAP. x. THE WEALTH OF NATIONS. 109

journeymen tailors, accordingly, earn there half-a-crown a day,
though eighteenpence may be reckoned the wages of common
labour. In small towns and country villages, the wages of journey-
men tailors frequently scarce equal those of common labour ; but
in London they arc often many weeks without employment, par-
ticularly during the summer. 1

When the inconstancy of employment is combined with the
hardship, disagreeableness, and dirtiness of the work, it sometimes
raises the wages of the most common labour above those of the
most skilful artificers. A collier working by the piece is supposed,
at Newcastle, to earn commonly about double, and in many parts of
Scotland about three times the wages of common labour. His
high wages arise altogether from the hardship, disagreeableness,
and dirtiness of his work. His employment" may, upon most
occasions, be as constant as he pleases. The coal-heavers in
London exercise a trade which in hardship, dirtiness, and dis-
agreeableness almost equals that of colliers ; and from the unavoid-
able irregularity in the arrival of coal-ships, the employment of the
greater part of them is necessarily very inconstant. If colliers,
therefore, commonly earn double and triple the wages of common
labour, it ought not to seem unreasonable that coal-heavers should
sometimes earn four and five times those wages. In the inquiry
made into their condition a few years ago, it was found that at the
rate at which they were then paid, they could earn from six to ten
shillings a day. Six shillings are about four times the wages of
common labour in London, and in every particular trade the lowest
common earnings may always be considered as those of the far
greater number. How extravagant soever those earnings may
appear, if they were more than sufficient to compensate all the
disagreeable circumstances of the business, there would soon be so
great a number of competitors as, in a trade which has no exclusive
privilege, would quickly reduce them to a lower rate.

The constancy or inconstancy of employment cannot aflect the
ordinary profits of stock in any particular trade. Whether the

1 When a sudden scarcity of labour tive economical event in history. The

occurs, the wages of that which was pro- price of female labour was doubled after

viously the cheapest labour experience that event, and ordinary labour was

the greatest rise. This fact was ex- raised far more than that of artisans,

hibited in the fullest manner after the See the Editor's History of Agriculture

Great riaguo of 1348, the most instruc- aud Prices, vol. i. p. 269 sq^.

110 THE NATURE AND CAUSES OF BOOK i.

stock is or is not constantly employed depends, not upon the trade 5
but the trader.

Fourthly, The wages of labour vary according to the small or
great trust which must be reposed in the workman.

The wages of goldsmiths and jewellers are everywhere superior
to those of many other workmen, not only of equal, but of much
superior ingenuity; on account of the precious materials with
which they are entrusted.

We trust our health to the physician ; our fortune and sometimes
our life and reputation to the lawyer and attorney. Such con-
fidence could not safely be reposed in people of a very mean or low
condition. Their reward must be such, therefore, as may give them
that rank in the society which so important a trust requires. The
long time and the great expense which must be laid out in their
education, when combined \vith this circumstance, necessarily
enhance still further the price of their labour.

When a person employs only his own stock in trade, there is no
trust ; and the credit which he may get from other people, depends
not upon the nature of his trade, but upon their opinion of his
fortune, probity, and prudence. 1 The different rates of profit,
therefore, in the different branches of trade, cannot arise from the
different degrees of trust reposed in the traders,

Fifthly, The wages of labour in different employments vary
according to the probability or improbability of success in them.

The probability that any particular person shall ever be qualified
for the employment to which he is educated, is very different in
different occupations. In the greater part of mechanic trades,
success is almost certain ; but very uncertain in the liberal pro-
fessions. Put your son apprentice to a shoemaker, there is little
doubt of his learning to make a pair of shoes : but send him to
study the law, it is at least twenty to one if ever he makes such
proficiency as will enable him to live by the business. In a
perfectly fair lottery, those who draw the prizes ought to gain all
that is lost by those who draw the blanks. In a profession where

1 This credit, constituting ' good-will,' And as commercial morality is, unfor-

or ' connexion,' is an exceedingly im- tunately, a marketable quality, so skill

portant element in a trader's business. in interpreting the turns of the market,

It does not, as Smith says, increase his intelligence in purchasing and selling,

profit, unless indeed the trust is of a and similar intellectual qualities, go far

very exceptional character, but it en- towards determining the differences be-

larges his market almost indefinitely. tween profits in different trades.

CHAP. x. THE WEALTH OF NATIONS.

twenty fail for one that succeeds, that one ought to gain all that
should have hecn gained hy the unsuccessful twenty. The coun-
sellor at law who, perhaps at near forty years of age, begins to
make something by his profession, ought to receive the retribution,
not only of his own so tedious and expensive education, but of that
of more than twenty others who are never likely to make anything
by it. How extravagant soever the fees of counsellors at law may
sometimes appear, their real retribution is never equal to this.
Compute in any particular place, what is likely to be annually
gained, and what is likely to be annually spent, by all the different
workmen in any common trade, such as that of shoemakers or
weavers, and you will find that the former sum will generally
exceed the latter. But make the same computation with regard
to all the counsellors and students of law, in all the different inns of
court, and you will find that their annual gains bear but a very small
proportion to their annual expense, even though you rate the former
as high, and the latter as low, as can well be done. The lottery of
the law, therefore, is very far from being a perfectly fair lottery ;
and that, as well as many other liberal and honourable professions
are, in point of pecuniary gain, evidently under-recompensed.

Those professions keep their level, however, with other occupa-
tions, and notwithstanding these discouragements, all the most
generous and liberal spirits are eager to crowd into them. Two
different causes contribute to recommend them. First, the desire
of the reputation which attends upon superior excellence in any of
them ; and, secondly, the natural confidence which every man has
more or less, not only in his own abilities, but in his own good
fortune.

To excel in any profession, in which but few arrive at mediocrity,
is the most decisive mark of what is called genius or superior
talents. The public admiration which attends upon such dis-
tinguished abilities, makes always a part of their reward ; a greater
or smaller in proportion as it is higher or lower hi degree. It
makes a considerable part of that reward in the profession of physic;
a still greater perhaps in that of law; in poetry and philosophy it
makes almost the whole.

There are some very agreeable and beautiful, talents of which the
possession commands a certain sort of admiration ; but of which the
exercise for the sake of gain is considered, whether from reason or

112 THE NATURE AND CAUSES OF BOOK i.

prejudice, as a sort of public prostitution. The pecuniary recom-
pense, therefore, of those who exercise them in this manner, must
be sufficient, not only to pay for the time, labour, and expense of
acquiring the talents, but for the discredit which attends the employ-
ment of them as the means of subsistence. The exorbitant rewards
of players, opera-singers, opera-dancers, &c. are founded upon those
two principles ; the rarity and beauty of the talents, and the dis-
credit of employing them in this manner. It seems absurd at first
sight that we shpuld despise their persons and yet reward their
talents with the most profuse liberality. While we do the one,
however, we must of necessity do the other. Should the public
opinion or prejudice ever alter with regard to such occupations,
their pecuniary recompense would quickly dimmish. More people
would apply to them, and the competition would quickly reduce the
price of their labour. Such talents, though far from being common,
are by no means so rare as is imagined. Many people possess them
in great perfection who disdain to make this use of them ; and
many more are capable of acquiring them, if anything could be
made honourably by them.

The over- weening conceit which the greater part of men have of
their own abilities, is an ancient evil remarked by the philosophers
and moralists of all ages. Their absurd presumption in their own
good fortune has been less taken notice of. It is however, if
possible, still more universal. There is no man living who, when
in tolerable health and spirits, has not some share of it. The chance
of gain is by every man more or less over-valued, and the chance of
loss is by most men under-valued, and by scarce any man, who is
in tolerable health and spirits, valued more than it is worth.

That the chance of gain is naturally over- valued, we may learn
from the universal success of lotteries. The world neither ever saw,
nor ever will see, a perfectly fair lottery ; or one in which the whole
gain compensated the whole loss ; because the undertaker could
make nothing by it. In the state lotteries the tickets are really
not worth the price which is paid by the original subscribers, and
yet commonly sell in the market for twenty, thirty, and sometimes
forty per cent, advance. The vain hope of gaining some of the
great prizes is the sole cause of this demand. The soberest people
scarce look upon it as a folly to pay a small sum for the chance of
gaining ten or twenty thousand pounds ; though they know that

CHAP. x. THE WEALTH OF NATIONS. 113

even that small sum is perhaps twenty or thirty per cent, more than
the chance is worth. In a lottery in which no prize exceeded twenty
pounds, though in other respects it approached much nearer to a
perfectly fair one than the common state lotteries, there would not
be the same demand for tickets. In order to have a better chance
for some of the great prizes, some people purchase several tickets,
and others small shares in a still greater number. There is not,
however, a more certain proposition in mathematics than that the
more tickets you adventure upon, the more likely you are to be
a loser. Adventure upon all the tickets in the lottery, and you
lose for certain ; and the greater the number of your tickets the
nearer you approach to this certainty.

That the chance of loss is frequently undervalued, and scarce
ever valued more than it is worth, we may learn from the very
moderate profit of insurers. In order to make insurance, either
from fire or sea-risk, a trade at all, the common premium must be
sufficient to compensate the common losses, to pay the expense of
management, and to afford such a profit as might have been drawn
from an equal capital employed in any common trade. The person
who pays no more than this, evidently pays no more than the real
value of the risk, or the lowest price at which he can reasonably
expect to insure it. But though many people have made a little
money by insurance, very few have made a great fortune ; and from
this consideration alone it seems evident enough that the ordinary
balance of profit and loss is not more advantageous in this, than in
other common trades by which so many people make fortunes.
Moderate, however, as the premium of insurance commonly is,
many people despise the risk too much to care to pay it. Taking
the whole kingdom at an average, nineteen houses in twenty, or
rather perhaps ninety-nine in a hundred, are not insured from fire.
Sea-risk is more alarming to the greater part of people, and the
proportion of ships insured to those not insured is much greater.
Many sail, however, at all seasons, and even in time of war, without
any insurance. This may sometimes perhaps be done without any
imprudence. When a great company, or even a great merchant,
has twenty or thirty ships at sea, they may, as it were, insure
one another. The premium saved upon them all may more
than compensate such losses as they are likely to meet with iji
the common course of chances. The neglect of insurance upon

VOL. i. i

114 THE NATURE AND CAUSES OF BOOK i.

shipping, however, in the same manner as upon houses, is, in most
cases, the effect of no such nice calculation, but of mere thoughtless
rashness and presumptuous contempt of the risk.

The contempt of risk and the presumptuous hope of success are
in no period of life more active than at the age at which young
people choose their professions. How little the fear of misfortune is
then capable of balancing the hope of good luck, appears still more
evidently in the readiness of the common people to enlist as soldiers
or to go to sea, than in the eagerness of those of better fashion to
enter into what are called the liberal professions.

What a common soldier may lose is obvious enough. Without
regarding the danger, however, young volunteers never enlist so
readily as at the beginning of a new war ; and though they have
scarce any chance of preferment, they figure to themselves, in their
youthful fancies, a thousand occasions of acquiring honour and
distinction which never occur. These romantic hopes make the
whole price of their blood. Their pay is loss than that of common
labourers, and in actual service their fatigues are much greater.

The lottery of the sea is not altogether so disadvantageous as
that of the army. The son of a creditable labourer or artificer may
frequently go to sea with his father's consent ; but if he enlists as a
soldier it is always without it. Other people see some chance of
his making something by the one trade : nobody but himself sees
any of his making anything by the other. The great admiral is
less the object of public admiration than the great general, and the
highest success in the sea service promises a less brilliant fortune
and reputation than equal success in the land. The same difference
runs through all the inferior degrees of preferment in both. By
the rules of precedency a captain in the navy ranks with a colonel
in the army : but he does not rank with him in the common esti-
mation. As the great prizes in the lottery are less, the smaller
ones must be more numerous. Common sailors, therefore, more
frequently get some fortune and preferment than common soldiers ;
and the hope of those prizes is what principally recommends the
trade. Though their skill and dexterity are much superior to that
of almost any artificers, and though their whole life is one continual
scene of hardship and danger, yet for all this dexterity and skill,
for all those hardships and dangers, while they remain in the con-
dition of common sailors they receive scarce any other recompense

CHAP. x. THE WEALTH OF NATIONS. 115

but the pleasure of exercising 1 the one and surmounting the other.
Their wages are not greater than those of common labourers at the
port which regulates the rate of seaman's wages. As they are con-
tinually going from port to port, the monthly pay of those who sail
from all the different ports of Great Britain is more nearly upon a
level than that of any other workmen in those different places ; and
the rate of the port to and from which the greatest number sail,
that is the port of London, regulates that of all the rest. At
London the wages of the greater part of the different classes of
workmen are about double those of the same classes at Edinburgh.
But the sailors who sail from the port of London seldom earn
above three or four shillings a month more than those who sail
from the port of Leith, and the difference is frequently not so great.
In time of peace, and in the merchant service, the London price is
from a guinea to about seven-and- twenty shillings the calendar
month. A common labourer in London, at the rate of nine or ten
shillings a week, may earn in a calendar month from forty to five-
and-forty shillings. The sailor, indeed, over and above his pay is
supplied with provisions. Their value, however, may not perhaps
always exceed the difference between his pay and that of the
common labourer ; and though it sometimes should, the excess will
not be clear gain to the sailor, because he cannot share it with his
wife and family, whom he must maintain out of his wages at home.

The dangers and hair- breadth escapes of a life of adventures,
instead of disheartening young people, seem frequently to recom-
mend a trade to them. A tender mother, among the inferior ranks
of people, is often afraid to send her son to school at a sea-port
town, lest the sight of the ships and the conversation and adven-
tures of the sailors should entice him to go to sea. The distant
prospect of hazards, from which we can hope to extricate ourselves
by courage and address, is not disagreeable to us, and does not raise
the wages of labour in any employment. It is otherwise with those
in which courage and address can be of no avail. In trades which
are known to be very unwholesome, the wages of labour are always
remarkably high. Unwholesomeness is a species of disagreeable-
ness, and its effects upon the wages of labour are to be ranked under
that general head.

In all the different employments of stock, the ordinary rate of
profit varies more or less with the certainty or uncertainty of the

I 2

116 THE NATURE AND CAUSES OF BOOK i.

returns. These are in general less uncertain in the inland than in
the foreign trade, and in some branches of the foreign trade than in
others ; in the trade to North America, for example, than in that
to Jamaica. The ordinary rate of profit always rises more or less
with the risk. It does not, however, seem to rise in proportion to
it, or so as to compensate it completely. Bankruptcies are most
frequent in the most hazardous trades. The most hazardous of all
trades, that of a smuggler, though when the adventure succeeds it
is likewise the most profitable, is the infallible road to bankruptcy.
The presumptuous hope of success seems to act here as upon all
other occasions, and to entice so many adventurers into those
hazardous trades, that their competition reduces the profit below
what is sufficient to compensate the risk. To compensate it
completely, the common returns ought, over and above the ordi-
nary profits of stock, not only to make up for all occasional losses,
but to afford a surplus profit to the adventurers of the same nature
with the profit of insurers. But if the common returns were
sufficient for all this, bankruptcies would not be more frequent in
these than in other trades.

Of the five circumstances, therefore, which vary the wages of
labour, two only affect the profits of stock : the agreeableness or
disagreeableness of the business, and the risk or security with
which it is attended. In point of agreeableness or disagreeable-
ness, there is little or no difference in the far greater part of the
different employments of stock ; but a great deal in those of labour ;
and the ordinary profit of stock, though it rises with the risk, does
not always seem to rise in proportion to it. It should follow from
all this, that, in the same society or neighbourhood, the average
and ordinary rates of profit in the different employments of stock
should be more nearly upon a level than the pecuniary wages of the
different sorts of labour. They are so accordingly. The difference
between the earnings of a common labourer and those of a well-
employed lawyer or physician, is evidently much greater than that
between the ordinary profits in any two different branches of trade.
The apparent difference, besides, in the profits of different trades is
generally a deception, arising from our not always distinguishing
what ought to be considered as wages from what ought to be con-
sidered as profit.

Apothecaries' profit is become a bye-word, denoting something

CHAP. x. THE WEALTH OF NATIONS. 117

uncommonly extravagant. This great apparent profit, however, is
frequently no more than the reasonable wages of labour. The skill
of an apothecary is a much nicer and more delicate matter than
that of any artificer whatever ; and the trust which is imposed in
him is of much greater importance. He is the physician of the
poor in all cases, and of the rich when the distress or danger is not
very great. His reward, therefore, ought to be suitable to his skill
and his trust, and it arises generally from the price at which he
sells his drugs. But the whole drugs which the best-employed
apothecary, in a large market town, will sell in a year, may not
perhaps cost him above thirty or forty pounds. Though he should
sell them, therefore, for three or four hundred, or at a thousand per
cent, profit, this may frequently be no more than the reasonable
wages of his labour charged, in the only way in which he can
charge them, upon the price of his drugs. The greater part of the
apparent profit is real wages disguised in the garb of profit.

In a small soa-port town a little grocer will make forty or fifty
per cont. upon a stock of a single hundred pounds, while a con-
siderable wholesale merchant in the same place will scarce make
eight or ten per cent, upon a stock of ten thousand. The trade of
the grocer may be necessary for the convcniency of the inhabitants,
and the narrowness of the market may not admit the employment
of a larger capital in the business. The man, however, must not
only live by his trade, but live by it suitably to the qualifications
which it requires. Besides possessing a little capital, he must be
able to read, write, and account, and must be a tolerable good
judge too of perhaps fifty or sixty different sorts of goods, their
prices, qualities, and the markets where they are to be had cheapest.
He must have all the knowledge, in short, that is necessary for a
great merchant, which nothing hinders him from becoming but the
want of a sufficient capital. Thirty or forty pounds a year cannot
be considered as too great a recompense for the labour of a person
so accomplished. Deduct this from the seemingly great profits of
his capital, and little more will remain, perhaps, than the ordinary
profits of stock. The greater part of the apparent profit is, in this
case too, real wages, 1

1 This passage seems to be much more rent stand to production than that in
in accordance with a logical analysis of p. 50, above,
the relations in which profit, wages, and

118 THE NATURE AND CAUSES OF BOOK i.

The difference between the apparent profit of the retail and that
of the wholesale trade is much less in the capital than in small
towns and country villages. Where ten thousand pounds can be
employed in the grocery trade, the wages of the grocer's labour
make but a very trifling addition to the real profits of so great a
stock. The apparent profits of the wealthy retailer, therefore, are
there more nearly upon a level with those of the wholesale mer-
chant. It is upon this account that goods sold by retail arc
generally as cheap, and frequently much cheaper, in the capital
than in small towns and country villages. Grocery goods, for
example, are generally much cheaper; bread and butcher's-meat
frequently as cheap. It costs no more to bring grocery goods to
the great town than to the country village ; but it costs a great
deal more to bring corn and cattle, as the greater part of them
must be brought from a much greater distance. The prime cost of
grocery goods, therefore, being the same in both places, they are
cheapest where the least profit is charged upon them. The prime
cost of bread and butcher's-meat is greater in the great town than
in the country village ; and though the profit is less, therefore, they
are not always cheaper there, but often equally cheap. In such
articles as bread and butcher's-meat, the same cause, which
diminishes apparent profit, increases prime cost. The extent of
the market, by giving employment to greater stocks, diminishes
apparent profit ; but by requiring supplies from a greater distance,
it increases prime cost. This diminution of the one and increase
of the other seem, in most cases, nearly to counterbalance one
another ; which is probably the reason that, though the prices of
corn and cattle are commonly very different in different parts of the
kingdom, those of bread and butcher's-meat are generally very
nearly the same through the greater part of it. 1

Though the profits of stock, both in the wholesale and retail
trade, are generally less in the capital than in small towns and
country villages, yet great fortunes are frequently acquired from

1 The equalisation of town and country venient methods of collecting and clis*
pr'ces has been powerfully induced by the tributing produce. Hence the enormous
extension of railway communication, and rise in the rents of shops situated in con-
other improved means oforansit. Under venient thoroughfares, the tenant being
existing circumstances the balance is unable, in the competition after profit, to
rather in favour of the towns, where there appropriate the whole of the advantage
is a more regular market, and more con- of a business site to himself.

CHAP. x. THE WEALTH OF NATIONS. 119

small beginnings in the former, and scarce ever in the latter. In
small towns and country villages, on account of the narrowness of
the market, trade cannot always be extended as stock extends. In
such places, therefore, though the *rate of a particular person's
profits may be very high, the sum or amount of them can never be
very great, nor consequently that of his annual accumulation. In
great towns, on the contrary, trade can be extended as stock
increases, and the credit of a frugal and thriving man increases
much faster than his stock. His trade is extended in proportion to
the amount -of both, nnd the sum or amount of his profits is iu
proportion to the extent of his trade, and his annual accumulation
in proportion to the amount of his profits. It seldom happens,
however, that great fortunes are made even in great towns by any
one regular, established, and well-known branch of business, but iu
consequence of a long life of industry, frugality, and attention.
Sudden fortunes, indeed, are sometimes made in such places by
what is called the trade of speculation. The speculative merchant
exercises no one regular, established, or well-known branch of
business. lie is a corn merchant this year, and a wine merchant
the next, and a sugar, tobacco, or tea merchant the year after. He
outers into every trade when he foresees that it is likely to be more
than commonly profitable, and he quits it when he foresees that its
profits are likely to return to the level of other trades. His profits
and losses, therefore, can bear no regular proportion to those of any
one established and well-known branch of business. A bold adven-
turer may sometimes acquire a considerable fortune by two or three
successful speculations ; but is just as likely to lose one by two or
three unsuccessful ones. This trade can be carried on nowhere
but in great towns. It is only in places of the most extensive com-
merce and correspondence that the intelligence requisite for it can
be had.

The five circumstances above mentioned, though they occasion
considerable inequalities in the wages of labour and profits of stock,
occasion none in the whole of the advantages and disadvantages,
real or imaginary, of the different employments of either. The
nature of those circumstances is such, that they make up for a
small pecuniary gain in some, and counterbalance a great one in
others.

In order, however, that this equality may take place in the whole

T20 THE NATURE AND CAUSES OF BOOK i.

0f their advantages or disadvantages, three things are requisite even
where there is the most perfect freedom. First, the employments
must be well known and long established in the neighbourhood ;
secondly, they must be in their ordinary, or what may be called
their natural state ; and, thirdly, they must be the sole or principal
employments of those who occupy them.

First, This equality can take place only in those employments
which are well known, and have been long established in the
neighbourhood.

Where all other circumstances are equal, wages are generally
higher in new than in old trades. When a projector attempts
to establish a new manufacture, he must at first entice his work-
men from other employments by higher wages than they can either
earn in their own trades, or than the nature of his work would
otherwise require, and a considerable time miibt pass away before
he can venture to reduce them to the common level. Manufactures
for which the demand arises altogether from fashion and fancy,
are continually changing, and seldom last long enough to be con-
sidered as old-established manufactures. Those, on the contrary,
for which the demand arises chiefly from use or necessity, are less
liable to change, and the same form or fabric may continue in
demand for whole centuries together. The wages of labour, there-
fore, are likely to be higher in manufactures of the former, than
in those of the latter kind. Birmingham deals chiefly in manu-
factures of the former kind ; Sheffield in those of the latter ; and
the wages of labour in those two different places are said to be
suitable to this difference in the nature of their manufactures.

The establishment of any new manufacture, of any new branch of
commerce, or of any new practice in agriculture, is always a specu-
lation, from which, the projector promises himself extraordinary
profits. These profits sometimes are very great, and sometimes,
more frequently, perhaps, they are quite otherwise ; but in general
they bear no regular proportion to those of other old trades in
the neighbourhood. If the project succeeds, they are commonly
at first very high. When the trade or practice becomes thoroughly
established and well known, the competition reduces them to the
level of other trades.

Secondly, This equality in the whole of the advantages and dis-
advantages of the different employments of labour and stock, can

CHAP. x. THE WEALTH OF NATIONS. 121

take place only in the ordinary, or what may be called the natural
state of those employments.

The demand for almost every different species of labour is some-
times greater and sometimes less than usual. In the one case
the advantages of the employment rise above, in the other they
fall below the common level. The demand for country labour is
greater at hay-time and harvest, than during the greater part of
the year; and wages rise with the demand. In time of war,
when forty or fifty thousand sailors are forced from the merchant
service into that of the king, the demand for sailors to merchant
ships necessarily rises with their scarcity, and their wages upon
such occasions commonly rise from a guinea and seven-and-twenty
shillings, to forty shillings and three pounds a month. In a
decaying manufacture, on the contrary, many workmen, rather than
quit their old trade, arc contented with smaller wages than would
otherwise be suitable to the nature of their employment.

The profits of stock vary with the price of the commodities in
which it is employed. As the price of any commodity rises above
the ordinary or average rate, the profits of at least some part of
the stock that is employed in bringing it to market rise above
their proper level, and as it falls they sink below it. All com-
modities are more or less liable to variations of price, but some
are much more so than others. In all commodities which are
produced by human industry, the quantity of industry annually
employed is necessarily regulated by the annual demand, in such
a manner that the average annual produce may, as nearly as
possible, be equal to the average annual consumption. In some
employments, it has already been observed, the same quantity of
industry will always produce the same, or very nearly the same
quantity of commodities. In the linen or woollen manufactures,
for example, the same number of hands will annually work up
very nearly the same quantity of linen and woollen cloth. The
variations in the market-price of such commodities, therefore, can
arise only from some accidental variation in the demand. A public
mourning raises the price of black cloth. But as the demand
for most sorts of plain linen and woollen cloth is pretty uniform,
so is likewise the price. But there are other employments in which
the same quantity of industry will not always produce the same
quantity of commodities. The same quantity of industry, for

122 THE NATURE AND CAUSES Of 1 BOOK I.

example, will, in different years, produce very different quantities
of corn, wine, hops, sugar, tobacco, &c. The price of such com-
modities, therefore, varies not only with the variations of demand,
but with the much greater and more frequent variations of quantity,
and is consequently extremely fluctuating. But the profit of some
of the dealers must necessarily fluctuate with the price of the
commodities. The operations of the speculative merchant are prin-
cipally employed about such commodities. He endeavours to buy
them up when he foresees that their price is likely to rise, and to
sell them when it is likely to fall.

Thirdly, This equality in the whole of the advantages and dis-
advantages of the different employments of labour and stock, can
take place only in such as are the sole or principal employments
of those who occupy them.

When a person derives his subsistence from one employment,
which does not occupy the greater part of his time ; in the intervals
of his leisure he is often willing to work at another for less wages
than would otherwise suit the nature of the employment. 1

There still subsists in many parts of Scotland a eet of people
called Cotters or Cottagers, though they were more frequent some
years ago than they are now. They are a sort of out-servants
of the landlords and farmers. The usual reward which they receive
from their masters is a house, a small garden for pot herbs, as
much grass as will feed a cow, and, perhaps, an acre or two of
bad arable land. When their master has occasion for their labour,
he gives them, besides, two pecks of oatmeal a week, worth about
sixtcenpence sterling. During a great part of the year he has
little or no occasion for their labour, and the cultivation of their
own little possession is not sufficient to occupy the time which is left
at their own disposal. -When such occupiers were more numerous
than they are at present, they are said to have been willing to
give their spare time for a very small recompense to anybody,
and to have wrought for less wages than other labourers. In
ancient times they seem to have been common all over Europe.
In countries ill-cultivated and worse inhabited, the greater part

* People who ply any labour as a bye a coarse cloth called gunny. But the

product of their ordinary avocation, will labour given to this product is hardly

sell the produce of their labour at very appraised in the price of the product, for

low prices. Almost every person in Hin- jute and gunny are, weight for weight,

dostan spins and weaves jute fibre into at nearly the same price.

OHAP. x. THE WEALTH OF NATIONS. 123

of landlords and farmers could not otherwise provide themselves
with the extraordinary number of hands which country labour
requires at certain seasons. The daily or weekly recompense which
such labourers occasionally received from their masters, was evi-
dently not the whole price of their labour. Their small tenement
made a considerable part of it. This daily or weekly recompense,
however, seems to have been considered as the whole of it, by
many writers who have collected the prices of labour and provisions
in ancient times, and who have taken pleasure in representing both
as wonderfully low.

The produce of such labour comes frequently cheaper to market
than would otherwise be suitable to its nature. Stockings in
many parts of Scotland are knit much cheaper than they can
anywhere be wrought upon the loom. They are the work of
servants and labourers, who derive the principal part of their
subsistence from some other employment. More than a thousand
pair of Shetland stockings are annually imported into Leith, of
which the price is from fivepence to sevenpenee a pair. At Ler-
wick, the small capital of the Shetland Islands, tenpence a day,
I have been assured, is a common price of common labour. In
the same islands they knit worsted stockings to the value of a
guinea a pair and upwards.

The spinning of linen yarn is carried on in Scotland nearly in
the same way as the knitting of stockings, by servants who are
chiefly hired for other purposes. They earn but a very scanty
subsistence who endeavour to get their whole livelihood by either
of those trades. In most parts of Scotland she is a good spinner
who can earn twentypenco a week.

In opulent countries the market is generally so extensive, that
any one trade is sufficient to employ the whole labour and stock
of those who occupy it. Instances of people's living by one
employment, and at the same time deriving some little advantage
from another, occur chiefly in poor countries. The following in-
stance, however, of something of the same kind is to be found in the
capital of a very rich one. There is no city in Europe, I believe,
in which house-rent is dearer than in London, and yet I know
no capital in which a furnished apartment can be hired so cheap.
Lodging is not only much cheaper in London than in Paris ; it
is much cheaper than in Edinburgh of the same degree of good-

124 THE NATURE AND CAUSES OF BOOK i.

ness ; and what may seem extraordinary, the dearness of house-
rent is the cause of the cheapness of lodging. The dearness of
house-rent in London arises, not only from those causes which
render it dear in all great capitals, the dearness of labour, the
dearness of all the materials of building, which must generally
be brought from a great distance, and above all the dearness of
ground-rent, every landlord acting the part of a monopolist, and
frequently exacting a higher rent for a single acre of bad land in
a town, than can be, had for a hundred of the best in the country ;
but it arises in part from the peculiar manners and customs of
the people, which oblige every master of a family to hire a whole
house from top to bottom. A dwelling-house in England means
everything that is contained under the same roof. In France,
Scotland, and many other parts of Europe, it frequently means
no more than a single storey. A tradesman in London is obliged
to hire a whole house in that part of the town where his customers
live. His shop is upon the ground floor, and he and his family
sleep in the garret ; and he endeavours to pay a part of his house-
rent by letting the two middle stories to lodgers. He expects
to maintain his family by his trade, and not by his lodgers.
Whereas, at Paris and Edinburgh, the people who let lodgings
have commonly no other means of subsistence ; and the price of
the lodging must pay, not only the rent of the house, but the
whole expense of the family. 1

PART II.

Ineqmlities occasioned ly the Policy of Europe?

SUCH are the inequalities in the whole of the advantages and
disadvantages of the different employments of labour and stock,
which the defect of any of the three requisites above mentioned

1 The facts alluded to by SmHh are which, as far as the United Kingdom is

of course no longer operative, but the concerned, have been abrogated. The

principle on which he arguea governs privileges of corporations and guilds are

similar facts. The price of the article abolished, with a very few exceptions,

is necessarily heightened when the de- apprenticeships are no longer the neces-

raand for it is continued only for a short sary prelude to occupations, and there

period or season, as at English watering- are no longer statutory restrictions on

places. the migration of labour and capital

The larger part of this portion of from place to place, or from country

the tenth chapter deals with regulations to country.

CHAP. x. THE WEALTH OF NATIONS. 125

must occasion," even where there is the most perfect liberty. But
the policy of Europe, by not leaving things at perfect liberty,
occasions other inequalities of much greater importance.

It does this chiefly in the three following ways. First, by
restraining the competition in some employments to a smaller
number than would otherwise be disposed to enter into them ;
secondly, by increasing it in others beyond what it naturally
would be; and, thirdly, by obstructing the free circulation of
labour and stock, both from employment to employment and from
place to place.

First, The policy of Europe occasions a very important inequality
in the whole of the advantages and disadvantages of the different
employments of labour and stock, by restraining the competition
in some employments to a smaller number than might otherwise
be disposed to onter into them.

The exclusive privileges of corporations are the principal means
it makes use of for this purpose.

The exclusive privilege of an incorporated trade necessarily re-
strains the competition, in the town where it is established, to
those who arc free of the trade. To have served an apprenticeship
in the town, under a master properly qualified, is commonly the
necessary requisite for obtaining this freedom. The bye-laws of
the corporation regulate sometimes the number of apprentices
which any master is allowed to have, and almost always the
number of years which each apprentice is obliged to serve. The
intention of both regulations is to restrain the competition to a
much smaller number than might otherwise be disposed to enter
into the trade. The limitation of the number of apprentices
restrains it directly. A long term of apprenticeship restrains it
more indirectly, but as effectually, by increasing the expense of
education.

In Sheffield no master cutler can have more than one apprentice
at a time, by a bye-law of the corporation. In Norfolk and
Norwich no master weaver can have more than two apprentices,
under pain of forfeiting five pounds a month to the king. No
master hatter can have more than two apprentices anywhere in
England, or in the English plantations, under pain of forfeiting
five pounds a month, half to the king, and half to him who shall
sue in any court of record. Both these regulations, though they

126 THE NATURE AND CAUSES OF BOOK i.

have been confirmed by a public law of the kingdom, are evidently
dictated by the same corporation spirit which enacted the bye-law
of Sheffield. The silk weavers in London had scarce been incor-
porated a year when they enacted a bye-law, restraining any master
from having more than two apprentices at a time. It required
a particular Act of Parliament to rescind this bye-law.

Seven years seem anciently to have been, all over Europe, the
usual term established for the duration of apprenticeships in the
greater part of incorporated trades. All such incorporations were
anciently called universities ; l which indeed is the proper Latin
name for any incorporation whatever. The university of smiths,
the university of tailors, &c. are expressions which we commonly
meet with in the old charters of ancient towns. When those par-
ticular incorporations which are now peculiarly called universities
were first established, the term of years which it was necessary
to study, in order to obtain the degree of Master of Arts, appears
evidently to have been copied from the term of apprenticeship
in common trades, of which the incorporations were much more
ancient. As to have wrought seven years under a master properly
qualified, was necessary in order to entitle any person to become
a master, and to have himself apprentices in a common trade ; so
to have studied seven years under a master properly qualified, was
necessary to entitle him to become a master, teacher, or doctor
(words anciently synonymous) in the liberal arts, and to have
scholars or apprentices (words likewise originally synonymous) to
study under him.

By the 5th of Elizabeth, commonly called the Statute of Ap-
prenticeship, it was enacted, that no person should for the future
exercise any trade, craft, or mystery at that time exercised in
England, unless he had previously served to it an apprenticeship
of seven years at least; and what before had been the bye-law
of many particular corporations, became in England the general
and public law of all trades carried on in market towns. For
though the words of the statute are very general, and seem plainly
to include the whole kingdom, by interpretation its operation has
been limited to market towns, it having been held that in country

1 See Du Cange on this word. It was employed to denote a corporation sole,
most frequently used for a corporate as a bishop or parson,
town ; but it seems to have even been

CHAP. x. THE WEALTH OF NATIONS. 127

villages a person may exercise several different trades, though he
has not served a seven years' apprenticeship to each, they being
necessary for the convenicncy of the inhabitants, and the number
of people frequently not being sufficient to supply each with a
particular set of hands. 1

By a strict interpretation of the words too the operation of this
statute has been limited to those trades which were established
in England before the 5th of Elizabeth, and has never been ex-
tended to such as have been introduced since that time. This
limitation has given occasion to several distinctions which, con-
sidered as rules of police, appear as foolish as can well be imagined.

It has been adjudged, for example, that a coach-maker can neither
himself make nor employ journeymen to make his coach wheels,
but must buy them of a master wheelwright ; this latter trade
having been exercised in England before the 5th of Elizabeth.
But a wheelwright, though he has never served an apprenticeship
to a coach-maker, may either himself make or employ journeymen
to make coaches; the trade of a coach-maker not being within the
statute, because not exercised in England at the time when it was
made. The manufactures of Manchester, Birmingham, and Wolver-
hampton are, many of them, upon this account, not within the
statute ; not having been exercised in England before the 5th of
Elizabeth.

In France, the duration of apprenticeships is different in different
towns and in different trades. In Paris, five years is the term
required in a great number ; but before any person can be qualified
to exercise the trade as a master, he must, in many of them, serve
five years more as a journeyman. During this latter term he is
called the companion of his master, and the term itself is called
his companionship. 2

In Scotland there is no general law which regulates universally
the duration of apprenticeships. The term is different in different
corporations. Where it is long, a part of it may generally be

1 The Statute of Apprenticeship was becomes a journeyman for five years,
repealed by 54 Geo. III. cap. 56. part of this time being necessarily spent

2 Perhaps the most stringent rules laid in foreign travel. Lastly, he must ob-
upon the introduction to local trade are tain a concession to trade, and these
found in Munich. The time of pupilage, concessions appear to be granted at the
says Mr. Wilberforce, varies from three discretion of the police. See Social Life
to five years, after which the pupil has in Munich, p. 310, &c.

to undergo an examination . Then he

128 THE NATURE AND CAUSES OF BOOK i.

redeemed by paying a small fine. In most towns too a very
small fine is sufficient to purchase the freedom of any corporation.
The weavers of linen and hempen cloth, the principal manufactures
of the country, as well as all other artificers subservient to them,
wheel-makers, reel-makers, &c., may exercise their trades in any
town corporate without paying any fine. In all towns corporate
all persons are free to sell butcher's meat upon any lawful day of
the week. Three years is in Scotland a common term of appren-
ticeship, even in some very nice trades; and in general I know
of no country in Eurdpe in which corporation laws are so little
oppressive.

The property which every man has in his own labour, as it is
the original foundation of all other property, so it is the most
sacred and inviolable. The patrimony of a poor man lies in the
strength and dexterity of his hands ; and to hinder him from
employing this strength and dexterity in what manner he thinks
proper without injury to his neighbour, is a plain violation of
this most sacred property. It is a manifest encroachment upon
the just liberty both of the workman, and of those who might
be disposed to employ him. As it hinders the one from working
at what he thinks proper, so it hinders the others from employing
whom they think proper. To judge whether he is fit to be
employed, may surely be trusted to the discretion of the employers
whose interest it so much concerns. The affected anxiety of the
law-giver lest they shoiild employ an improper person, is evidently
as impertinent as it is oppressive.

The institution of long apprenticeships can give no security that
insufficient workmanship shall not frequently be exposed to public
sale. When this is done it is generally the effect of fraud, and not
of inability; and the longest apprenticeship can give no security
against fraud. Quite different regulations are necessary to prevent
this abuse. The sterling mark upon plate, and the stamps upon
linen and woollen cloth, give the purchaser much greater security
than any Statute of Apprenticeship. He generally looks at these,
but never thinks it worth while to inquire whether the workman
had served a seven years' apprenticeship.

The institution of long apprenticeships has no tendency to form
young people to industry. A journeyman who works by the piece
is likely to be industrious, because he derives a benefit from every

CHAP. x. THE WEALTH OF NATIONS. 129

exertion of his industry. An apprentice is likely to be idle, and
almost always is so, because he has no immediate interest to be
otherwise. In the inferior employments, the sweets of labour
consist altogether in the recompense of labour. They who are
soonest in a condition to enjoy the sweets of it, are likely soonest
to conceive a relish for it, and to acquire the early habit of industry.
A young man naturally conceives an aversion to labour, when for
a long time he receives no benefit from it. The boys who are put
out apprentices from public charities are generally bound fcr more
than the usual number of years, and they generally turn out very
idle and worthless.

Apprenticeships were altogether unknown to the ancients. The
reciprocal duties of master and apprentice make a considerable
article in every modern code. The Roman law is perfectly silent
with regard to them. I know no Greek or Latin word (I might
venture, I believe, to assert that there is none) which expresses the
idea we now annex to the word Apprentice, a servant bound to
work at a particular trade for the benefit of a master, during a
term of years, upon condition that the master shall teach him
that trade. 1

Long apprenticeships are altogether unnecessary. The arts,
which are much superior to common trades, such as those of
making clocks and watches, contain no such mystery as to require
a long course of instruction. The first invention of such beautiful
machines, indeed, and even that of some of the instruments em-
ployed in making them, must, no doubt, have been the work of
deep thought and long time, and may justly be considered as
among the happiest efforts of human ingenuity. But when both
have been fairly invented and are well understood, to explain to
any young man, in the completest manner, how to apply the
instruments and how to construct the machines, cannot well require
more than the lessons of a few weeks : perhaps those of a few days
might be sufficient. In the common mechanic trades, those of
a few days might certainly be sufficient. The dexterity of hand,
indeed, even in common trades, cannot be acquired without much
practice and experience. But a young man would practise with

1 Apprenticeships are referred to very fourteenth century. Madox quotes the
early in English law. They are men- rule, that an apprentice was not permitted
tioned m Madox's Pormulare Angli- to marry during his term. SeeDuCangu,
canum, and by many chroniclers of the Apprenticius.
VOL. I. K

130 THE NATURE AND CAUSES OF BOOK i.

much more diligence and attention, if from the beginning he
wrought as a journeyman, being paid in proportion to the little
work which he could execute, and paying in his turn for the
materials which he might sometimes spoil through awkwardness
and inexperience. His education would generally in this way be
more effectual, and always less tedious and expensive. The master,
indeed, would be a loser. He would lose all the wages of the
apprentice, which he now saves, for seven years together. In the
end, perhaps, the apprentice himself would be a loser. In a trade
so easily learnt he would have more competitors, and his wages,
when he came to be a complete workman, would be much less than
at present. The same increase of competition would reduce the
profits of the masters as well as the wages of the workmen. The
trades, the crafts, the mysteries, would all be losers. But the
public would be a gainer, the work of all artificers coming in
this way much cheaper to market.

It is to prevent this reduction of price, and consequently of wages
and profit, by restraining that free competition which would most
certainly occasion it, that all corporations, and the greater part of
corporation laws, have been established. In order to erect a corpo-
ration, no other authority in ancient times was requisite in many
parts of Europe but that of the town corporate in which it was
estaKlibhed. In England, indeed, a charter from the king was
likewise necessary. But this prerogative of the Crown seems to
have been reserved rather for extorting money from the subject
than for the defence of the common liberty against such oppressive
monopolies. Upon paying a fine to the king, the charter seems
generally to have been readily granted ; and when any particular
class of artificers or traders thought proper to act as a corporation
without a charter, such adulterine guilds, as they were called, were
not always disfranchised upon that account, but obliged to fine
annually to the king for permission to exercise their usurped
privileges.* The immediate inspection of all corporations, and of
the bye-laws which they might think proper to enact for their own
government, belonged to the town corporate in which they were
established ; and whatever discipline was exercised over them, pro-
ceeded commonly, not from the king, but from that greater incorpora-
tion of which those subordinate ones were only parts or members.
* See Madox, Pirma Burgi, p. 26, &c.

CHAP. x. THE WEALTH OF NATIONS. 131

The government of towns corporate was altogether in the hands
of traders and artificers ; and it was the manifest interest of every
particular class of them to prevent the market from being over-
stocked, as they commonly express it, with their own particular
species of industry; which is in reality to keep it always under-
stocked. Each class was eager to establish regulations proper for
this purpose, and provided it was allowed to do so, was willing to
consent that every other class should do the same. In consequence
of such regulations, indeed, each class was obliged to buy the goods
they had occasion for from every other within the town, somewhat
dearer than they otherwise might have done. But in recompense
they were enabled to sell their own just as much dearer; so that so
far it was as broad as long, as they say; and in the dealings of the
different classes within the town with one another, none of them
were losers by these regulations. But in their dealings with the
country they were all great gainers; and in these latter dealings
consists the whole trade which supports and enriches every town.

Every town draws its whole subsistence,, and all the materials of
its industry, from the country. It pays for these chiefly in two
ways: first, by sending back to the country a part of those
materials wrought up and manufactured ; in which case their
price is augmented by the wages of the workmen and the profits
of their masters or immediate employers ; secondly, by sending to
it a part both of the rude and manufactured produce, either of other
countries, or of distant parts of the same country, imported into
the town ; in which case too the original price of those goods is
augmented by the wages of the carriers or sailors, and by the
profits of the merchants who employ them. In what is gained
upon the first of those two branches of commerce, consists the
advantage which the town makes by its manufactures ; in what
is gained upon the second, the advantage of its inland and foreign
trade. The wages of the workmen, and the profits of their different
employers, make up the whole of what is gained upon both. What-
ever regulations, therefore, tend to increase those wages and profits
beyond what they otherwise would be, tend to enable the town to
purchase, with a smaller quantity of its labour, the produce of
a greater quantity of the labour of the country. They give the
traders and artificers in the town an advantage over the landlords,
farmers, and labourers in the country, and break down that natural

132 THE NATURE AND CAUSES OF BOOK i.

equality which would otherwise take place in the commerce which is
carried on hetween them. The whole annual produce of the labour
of the society is annually divided between those two different sets
of people. By means of those regulations a greater share of it is
given to the inhabitants of the town than would otherwise fall to
them ; and a less to those of the country.

The price which the town really pays for the provisions and
materials annually imported into it, is the quantity of manufactures
and other goods annually exported from it. The dearer the latter
are sold the cheaper the former are bought. The industry of the
town becomes more, and that of the country less advantageous.

That the industry which is carried on in towns is, everywhere in
Europe, more advantageous than that which is carried on in the
country, without entering into any very nice computations, we may
satisfy ourselves by one very simple and obvious observation. In
every country of Europe we find at least a hundred people who
have acquired great fortunes from small beginnings by trade and
manufactures, the industry which properly belongs to towns, for one
who has done so by that which properly belongs to the country, the
raising of rude produce by the improvement and cultivation of land.
Industry, therefore, must be better rewarded, the wages of labour and
the profits of stock must evidently be greater in the one situation
than in the other. But stock and labour naturally seek the most
advantageous employment. They naturally, therefore, resort as
much as they can to the town and desert the country.

The inhabitants of a town being collected into one place, can
easily combine together. The most insignificant trades carried on
in towns have accordingly, in some place or other, been incor-
porated; and even where they have never been incorporated,
yet the corporation spirit, the jealousy of strangers, the aversion
to take apprentices, or to communicate the secret of their trade,
generally prevail in them, and often teach them, by voluntary
associations and agreements, to prevent that free competition which
they cannot prohibit by bye-laws. The trades which employ but
a small number of hands, run most easily into such combinations.
Half a dozen woolcombers, perhaps, are necessary to keep a thousand
spinners and weavers at work. By combining not to take appren-
tices they can not only engross the employment, but reduce the
whole manufacture into a sort of slavery to themselves, and raise

CHAP. x. THE WEALTH OF NATIONS. 133

the price of their labour much above what is due to the nature
of their work.

The inhabitants of the country, dispersed in distant places,
cannot easily combine together. They have not only never been
incorporated, but the corporation spirit never has prevailed among'
them. No apprenticeship has ever been thought necessary to
qualify for husbandry, the great trade of the country. After
what are called the fine arts and the liberal professions, however,
there is perhaps no trade which requires so great a variety of know-
ledge and experience. The innumerable volumes which have been
written upon it in all languages may satisfy us that among the
wisest and most learned nations, it has never been regarded as
a matter very easily understood. And from all those volumes we
shall in vain attempt to collect that knowledge of its various and
complicated operations, which is commonly possessed even by the
common farmer ; how contemptuously soever the very contemptible
authors of some of them may sometimes affect to speak of him.
There is scarce any common mechanic trade, on the contrary, of
which all the operations may not be as completely and distinctly
explained in a pamphlet of a very few pages, as it is possible for
words illustrated by figures to explain them. In the history of the
arts, now publishing by the French Academy of Sciences, several
of them are actually explained in this manner. The direction of
operations besides, which must be varied with every change of
the weather as well as with many other accidents, requires much
more judgment and discretion than that of those which are always
the same or very nearly the same.

Not only the art of the farmer, the general direction of the
operations of husbandry, but many inferior branches of country
labour require much more skill and experience than the greater
part of mechanic trades. The man who works upon brass and iron,
works with instruments and upon materials of which the temper
is always the same, or very nearly the same. But the man who
ploughs the ground with a team of horses or oxen, works with
instruments of which the health, strength, and temper are very
different upon different occasions. The condition of the materials
which he works upon too is as .variable as that of the instru-
ments which he works with, and both require to be managed with
much judgment and discretion. The common ploughman, though

134 THE NATURE AND CA USES OF BOOK i.

generally regarded as the pattern of stupidity and ignorance, is
seldom defective in this judgment and discretion. He is less
accustomed, indeed, to social intercourse than the mechanic who
lives in a town. His voice and language are more uncouth and
more difficult to be understood by those who are not used to them.
His understanding, however, being accustomed to consider a greater
variety of objects, is generally much superior to that of the other,
whose whole attention from morning till night is commonly oc-
cupied in performing one or two very simple operations. How
much the lower ranks of people in the country are really superior
to those of the town, is well known to every man whom cither
business or curiosity has led to converse much with both. 1 In
China and Hindostan accordingly both the rank and the wages of
country labourers are said to be superior to those of the greater part
of artificers and manufacturers. They would probably be so every-
where, if corporation laws and the corporation spirit did not
prevent it.

The superiority which the industry of the towns has everywhere
in Europe over that of the country, is not altogether owing to
corporations and corporation laws. It is supported by many other
regulations. The high duties upon foreign manufactures and upon
all goods imported by alien merchants, all tend to the same purpose.
Corporation laws enable the inhabitants of towns to raise their
prices, without fearing to be under-sold by the free competition of
their own countrymen. Those other regulations secure them equally
against that of foreigners. The enhancement of price occasioned
by both is ever where finally paid by the landlords, farmers, and
labourers of the country, who have seldom opposed the establish-
ment of such monopolies. They have commonly neither inclination
nor fitness to enter into combinations; and the clamour and
sophistry of merchants and manufacturers easily persuade them
that the private interest of a part, and of a subordinate part of the
society, is the general interest of the whole. 2

1 The reversal of this comparison in general intelligence is very low. Smith

the present day is indirect evidence of recognises farther on, how much this is

the fact, that the condition of the Eng- due to the legal relief of the Poor-laws,

lish agricultural labourer has materially But the effect of Poor-law relief a cen'

deteriorated since the time of Adam tury ago was as nothing when contrasted

Smith. The ' technical ' education of a- with that which is induced on agricul-

competent farm labourer is of the most tural labourers at present,

varied, and in many particulars, of the 2 The events which have happened

highest kind, but his social position and since the publication of thia work would

CHAP. x. THE WEALTH OF NATIONS. 135

In Great Britain the superiority of the industry of the towns
over that of the country seems to have been greater formerly than
in the present times. The wages of country labour approach nearer
to those of manufacturing labour, and the profits of stock employed
in agriculture to those of trading and manufacturing stock, than
they are said to have done in the last century or in the beginning of
the present. This change may be regarded as the necessary, though
very late consequence of the extraordinary encouragement given to
the industry of the towns. The stock accumulated in them comes
in time to be so great, that it can no longer be employed with the
ancient profit in that species of industry which is peculiar to them.
That industry has its limit like every other; and the increase of
stock, by increasing the competition, necessarily reduces the profit.
The lowering of profit in the town forces out stock to the country,
where, by creating a new demand for country labour, it necessarily
raises its wages. It then spreads itself, if I may say so, over tl e
face of the land, and by being employed in agriculture is in part
restored to the country, at the expense of which, in a great measure,
it had originally been accumulated in the town. That everywhere
in Europe the greatest improvements of the country have been
owing to such overflowings of the stock originally accumulated
in the towns, I shall endeavour to show hereafter ; and at the same
time to demonstrate, that though some countries have by this course
attained to a considerable degree of opulence, it is in itself neces-
sarily slow, uncertain, liable to be disturbed and interrupted by
innumerable accidents, and in every respect contrary to the order of
nature and of reason. The interests, prejudices, laws and customs
which have given occasion to it, I shall endeavour to explain as
fully and distinctly as I can in the Third and Fourth Books of
this Inquiry.

People of the same trade seldom meet together, even for merri-
ment and diversion, but the conversation ends in a conspiracy

materially modify the criticism which necessitated the organization and corn-
Smith has uttered upon merchants and pelled the labours of a powerful propa-
manufacturers on the one hand, land- ganda, the Anti - Corn - law League,
owners on the other. The former saw whose labours were crowned with sue-
that the mischief of monopolies was in- cess in 1 846, and even now seek ^ to
comparably greater than the benefit, and maintain their privileges by exemption
during the last century strove to carry from taxation, and to recover their mo-
out the principles of Free-trade. The nopolies by crippling the foreign toade
latter have clung with violent perti- in cattle,
nacity to the principle of Protection,

136 THE NATURE AND CAUSES OF BOOK i.

against the public, or in some contrivance to raise prices. It is
impossible indeed to prevent such meetings by any law which
either could be executed or would be consistent with liberty and
justice. But though the law cannot hinder people of the same
trade from sometimes assembling together, it ought to do nothing
to facilitate such assemblies ; much less to render them necessary.

A regulation which obliges all those of the same trade in a parti-
cular town to enter their names and places of abode in a public
register, facilitates such assemblies. It connects individuals who
might never otherwise be known to one another, and gives every
man of the trade' a direction where to find every other man
oif it.

A regulation which enables those of the same trade to tax them-
selves, in order to provide for their poor, their sick, their widows
and orphans, by giving them a common interest to manage, renders
such assemblies necessary.

An incorporation not only renders them necessary, but makes the
act of the majority binding upon the whole. In a free trade an
effectual combination cannot be established but by the unanimous
consent of every single trader, and it cannot last longer than every
single trader continues of the same mind. The majority of a
corporation can enact a bye-law, with proper penalties, which will
limit the competition more effectually and more durably than any
voluntary combination whatever.

The pretence that corporations are necessary for the better
government of the trade, is without any foundation. The real and
effectual discipline which is exercised over a workman is not that of
his corporation, but that of his customers. It is the fear of losing
their employment which restrains his frauds and corrects his negli-
gence. An exclusive corporation necessarily weakens the force of
this discipline. 1 A particular set of workmen must then be
employed, let them behave well or ill, It is upon this account that

1 The exclusive privileges of trading this security is obtained. It is certain

corporations having been abandoned, that such a motive was not the original

there ^are nomodern analogies to them in cause for conferring the privilege of

the United Kingdom, except those of the granting certificates to the medical cor-

legal and medical professions. The re- porations or the inns of court ; and it is

tention of these is defended for the reason equally certain that if the legislature i

given in the text, that a public certificate justified in permitting the certificate it

of fatness in an occupation demanding ought to constitute itself the judge of the

high capacity or skill, is a public service. qualification b
It may be doubted, however, whether

CHAP. x. THE WEALTH OF NATIONS. 137

in many large incorporated towns no tolerable workmen are to be
found, even in some of the most necessary trades. If you would
have your work tolerably executed, it must be done in the suburbs,
where the workmen having no exclusive privilege, have nothing but
their character to depend upon, and you must then smuggle it into
the town as well as you can.

It is in this manner that the policy of Europe, by restraining the
competition in some employments to a smaller number than would
otherwise be disposed to enter into them, occasions a very im-
portant inequality in the whole of the advantages and disadvantages
of the different employments of labour and stock.

Secondly, the policy of Europe, by increasing the competition in
some employments beyond what it naturally would be, occasions
another inequality, of an opposite kind, in the whole of the advan-
tages and disadvantages of the different employments of labour
and stock.

It lias been considered as of so much importance that a proper
number of young people should be educated for certain professions,
that, sometimes the public, and sometimes the piety of private
founders, have established many pensions, scholarships, exhibitions,
bursaries, &c. for this purpose, which draw many more people into
those trades than could otherwise pretend to follow them. In all
Christian countries, I believe, the education of the greater part of
Churchmen is paid for in this manner. Very few of them are
educated altogether at their own expense. The long, tedious, and
expensive education, therefore, of those who are, will not always
procure them a suitable reward, the Church being crowded with
people who, in order to get employment, are willing to accept of a
much smaller recompense than what such an education would other-
wise have entitled them to ; and in this manner the competition of
the poor takes away the reward of the rich. It would be indecent,
no doubt, to compare cither a curate or a chaplain with a journey-
man in any common trade. The pay of a curate or chaplain, how-
ever, may very properly be considered as of the same nature with
the wages of a journeyman. They are, all three, paid for their
work according to the contract which they may happen to make
with their respective superiors. Till after the middle of the four-
teenth century, five marks, containing about as much silver as ten
pounds of our present money, was in England the usual pay of a

138 THE NATURE AND CAUSES OF BOOK i.

curate or stipendiary parish priest, as we find it regulated by the
decrees of several different national councils. 1 At the same period
fourpence a day, containing the same quantity of silver as a
shilling of our present money, was declared to be the pay of a
master mason, and threepence a day, equal to ninepence of our
present money, that of a journeyman mason.* The wages of both
these labourers, therefore, supposing them to have been constantly
employed, were much superior to those of the curate. The wages of
the master mason, supposing him to have been without employment
one-third of the year, would have fully equalled them. By the
1 2th of Queen Anne, c. 12, it is declared, 'That whereas for want
of sufficient maintenance aad encouragement to curates, the cures
have in several places been meanly supplied, the bishop is, therefore,
empowered to appoint by writing under his hand and seal a suffi-
cient stipend or allowance, not exceeding fifty and not less than
twenty pounds a year/ Forty pounds a year is reckoned at
present very good pay for a curate, and notwithstanding this Act of
Parliament, there are many curacies under twenty pounds a year.
There are journeymen shoemakers in London who earn forty pounds
a year, and there is scarce an industrious workman of any kind in
that metropolis who does not earn more than twenty. This last
sum indeed does not exceed what is frequently earned by common
labourers in many country parishes. Whenever the law has
attempted to regulate the wages of workmen, it has always been
rather to lower them than to raise them. But the law has upon
many occasions attempted to raise the wages of curates, and for the
dignity of the Church, to oblige the rectors of parishes to give them
more than the wretched maintenance which they themselves might
be willing to accept of. And in both cases the law seerns to have
been equally ineffectual, and has never either been able to raise the
wages of curates or to sink those of labourers to the degree that
was intended ; because it has never been able to hinder either the
one from being willing, to accept of less than the legal allowance,

1 It should be remembered, however, made at the view of frankpledge in the

that the mediaeval ecclesiastics, besides manor courts. The fees of office varied,

the fixed stipend of their benefices, were Some are &iven in the Editor's History of

entitled, as it seems by common law, to Agriculture and Trices, vol. ii. pp. 580,

certain annual dues from each parishioner, 582 .

and to certain fees for particular offices. * See the Statute of Labourers, 25

The amount of these annual fees was Edw. III.
apparently determined by the payments

CHAP. x. THE WEALTH OF NATIONS. 139

on account of the indigence of their situation and the multitude of
their competitors; or the other from receiving 1 more, on account of
the contrary competition of those who expected to derive either
profit or pleasure from employing them.

The great benefices and other ecclesiastical dignities support the
honour of the Church, notwithstanding the mean circumstances of
some of its inferior members. The respect paid to the profession,
too, makes some compensation even to them for the meanness of
their pecuniary recompense. In England, and in all Roman
Catholic countries, the lottery of the Church is in reality much more
advantageous than is necessary. The example of the Churches of
Scotland, of Geneva, and of several other Protestant Churches, may
satisfy us that in so creditable a profession, in which education is
so easily procured, the hopes of much more moderate benefices will
draw a sufficient number of learned, decent, .and respectable men
into Holy Orders.

In professions in which there are no benefices, such as law and
physic, if an equal proportion of the people were educated at the
public expense, the competition would soon be so great as to sink
very much their pecuniary reward. It might then not be worth
any man's while to educate his son to either of those professions at
his own expense. They would be entirely abandoned to such as
had been educated by those public charities, whose numbers and
necessities would oblige them in general to content themselves with
a very miserable recompense, to the entire degradation of the now
respectable professions of law and physic. 1

That unprosperous race of men commonly called men of letters
are pretly much in the situation which lawyers and physicians
probably would be in upon the foregoing supposition. In every
part of Europe the greater part of them have been educated for the
Church, but have been hindered by different reasons from entering

1 What then is the justification of of which is not likely to be appraised or

endowments 'I It is plain, if we accept the labour purchased j 2. They render

Smith's inferences, that they lower the it possible that competent persons, who

wages of those who benefit by thorn, and would otherwise be debarred from rising

of those who, not competing for them, in life, should be selected and put for-

compel e for employment in the profes- ward. Adam Smith himself is a notable

sion for which they prepare certain per- example of the latter advantage. He

sons. It seems that their use is twofold : owed his learning and reputation to the

i. They are a means for rewarding or seven years' leisure which his Exhibition

supporting those who confer by their at Balliol gave him.
learning a benefit on society, the valuu

140 THE NATURE AND CAUSES OF BOOK i.

into Holy Orders. They have generally, therefore, been educated at
the public expense, and their numbers are everywhere so great as
commonly to reduce the price of their labour to a very paltry
recompense. 1

Before the invention of the art of printing the only employment
by which a man of letters could make anything by his talents was
that of a public or private teacher, or by communicating to other
people the curious and useful knowledge which he had acquired
himself: and this is still surely a more honourable, a more useful,
and in general e^en a more profitable employment than that other
of writing for a bookseller, to which the art of printing has given
occasion. The time and study, the genius, knowledge, and appli-
cation requisite to qualify an eminent teacher of the sciences, are at
least equal to what is necessary for the greatest practitioners in law
and physic. But the usual reward of an eminent teacher bears no
proportion to that of the lawyer or physician ; because the trade of
the one is crowded with indigent people who have been brought up
to it at the public expense, whereas those of the other two are
encumbered with very few who have not been educated at their
own. The usual recompense, however, of public and private
teachers, small as it may appear, would undoubtedly be less than it
is, if the competition of those yet more indigent men of letters who
write for bread was not taken out of the market. Before the
invention of the art of printing, a scholar and a beggar seem to
have been terms very nearly synonymous. The different governors
of the Universities before that time appear to have often granted
licences to their scholars to beg. 2

In ancient times, before any charities of this kind had been estab-
lished for the education of indigent people to the learned profes-
sions, the rewards of eminent teachers appear to have been much
more considerable. Isocrates, in what is called his discourse against
the Sophists, reproaches the teachers of his own times with incon-
sistency. 'Theymake the most magnificent promises to their scholars,'
says he, c and undertake to teach them to be wise, to be happy, and

1 The condition of men of letters during The number of those who are reported to

the middle of the eighteenth century is have been studying in Oxford before the

well brought out by Macaulay in his re- plague of 1348-49 is derived from a

view of Boswell's Life of Johnson. statement made by Gascoigne (1403-

^ * Before the Reformation, the Univer- 1458), who says that he counted the

sities were well nigh the only places of names in the chancellor's roll. Liber ve-

education which the country possessed. ritatum, MSS. Line. Coll. Oxford.

CHAP. x. THE WEALTH OF NATIONS. 141

to be just, and in return for so important a service they stipulate
the paltry reward of four or five minse. They who teach wisdom/
continues he, c ought certainly to be wise themselves ; but if any
man was to sell such a bargain for such a price, he would be con-
victed of the most evident folly. 5 1 He certainly does not mean
here to exaggerate the reward, and we may be assured that it was
not less than he represents it. Four minse were equal to thirteen
pounds six shillings and eightpence : five minse to sixteen pounds
thirteen shillings and fourpence. 2 Something not less than the largest
of those two sums, therefore, must at that time have been usually
paid to the most eminent teachers at Athens. Isocrates himself
demanded ten minse, or thirty-three pounds six shillings and eight-
pence, from each scholar. When he taught at Athens, he is said to
have had an hundred scholars. I understand this to be the number
whom ho taught at one time, or who attended what he would call
one course of lectures, a number which will not appear extraordi-
nary from so great a city to so famous a teacher, who taught too
what was at that time the most fashionable of all sciences, rhetoric.
He must have made, therefore, by each course of lectures, a thousand
minse, or ^3333 6s. 8d. A thousand minse, accordingly, is said by
Plutarch 3 in another place to have been his Didactron, or usual
price of teaching. Many other eminent teachers in those times
appear to have acquired great fortunes. Gorgias made a present
to the temple of Delphi of his own statue in solid gold. We must
not I presume, suppose that it was as large as the life. His way
of living, as well as that of Hippias and Protagoras, two other
fiminent teachers of those times, is represented by Plato as splendid
even to ostentation. Plato himself is said to have lived with a good
deal of magnificence. Aristotle, after having been tutor to Alexander
and most munificently rewarded, as it is universally agreed, both by
him and his father Philip, thought it worth while, notwithstanding,

1 The passage is very loosely translated, numbers, we can account for them only

but the substance of the original is by the intense rnemVl activity of the

rendered. It occurs in the Oratio contra Athenians, and by the fact that oral

Sophistas, sect. 3. instruction was the only means by which

y The Attic inina, according to Hussey, people were educated in those days. But

Essay on Ancient Weights and Money, the payment made to such teachers as

was equal to 4 is. $d. ; the drachma Isocrates, Gorgias, and Protagoras more

being 9! d., and the inina a hundred nearly resembles the fees paid by law-

draohmse. pupils to counsel and conveyancers than

8 Plutarch, Vitas X. Oratorum, p. 838. to anything else.
If there is no exaggeration in these

142 THE NATURE AND CAUSES OF BOOK r.

to return to Athens, in order to resume the teaching of his school.
Teachers of the sciences were probably in those times less common
than the} r came to be in an age or two afterwards, when the compe-
tition had probably somewhat reduced both the price of their labour
and the admiration for their persons. The most eminent of them,
however, appear always to have enjoyed a degree of consideration
much superior to any of the like profession in the present times.
The Athenians sent Carneades the academic and Diogenes the stoic
upon a solemn embassy to Rome ; and though their city had then
declined from its former grandeur, it was still an independent and
considerable republic. Carneades,, too, was a Babylonian 1 by birth,
and as there never was a people more jealous of admitting foreigners
to public offices than the Athenians, their consideration for him
must have been very great.

This inequality is upon the whole, perhaps, rather advantageous
than hurtful to the public. It may somewhat degrade the profes-
sion of a public teacher ; but the cheapness of literary education is
surely an advantage which greatly overbalances this trifling incon-
venicncy. The public too might derive still greater benefit from it,
if the constitution of those schools and colleges in which education
is carried on was more reasonable than it is at present through the
greater part of Europe.

Thirdly, the policy of Europe, by obstructing the free circulation
of labour and stock both from employment to employment, and
from place to place, occasions in some cases a very inconvenient
inequality in the whole of the advantages and disadvantages of their
different employments.

The Statute of Apprenticeship obstructs the free circulation of
labour from one employment to another, even in the same place.
The exclusive privileges of corporations obstruct it from one place
to another, even in the same employment.

It frequently happens that while high wages are given to the
workmen in one manufacture, those in another are obliged to con-
tent themselves with bare subsistence. The one is in an advancing
state, and has, therefore, a continual demand for new hands ; the
other is in a declining state, and the superabundance of hands is
continually increasing. Those two manufactures may sometimes
be in the same town, and sometimes in the same neighbourhood,

1 Carneadea was born at Cyrene.

CHAP. x. THE WEALTH OF NATIONS. 143

without being able to lend the least assistance to one another. The
Statute of Apprenticeship may oppose in the one case, and both that
and an exclusive corporation in the other. In many different manu-
factures, however, the operations are so much alike, that the work-
men could easily change trades with one another, if those absurd
laws did not hinder them. The arts of weaving plain linen and
plain silk, for example, are almost entirely the same. That of
weaving plain woollen is somewhat different ; but the difference is
so insignificant, that either a linen or a silk weaver might become
a tolerable workman in a very few days. If any of those three
capital manufactures, therefore, were decaying, the workmen might
find a resource in one of the other two which was in a more pros-
perous condition ; and their wages would neither rise too high in
the thriving, nor sink too low in the decaying manufacture. The
linen manufacture indeed is, in England, by a particular statute,
open to everybody ; but as it is not much cultivated through the
greater part of the country, it can afford no general resource to the
workmen of other decaying manufactures, who, wherever the Statute
of Apprenticeship takes place, have no other choice but either to
come upon the parish, o-r to work as common labourers, for which,
by their habits, they are much worse qualified than for any sort
of manufacture that bears any resemblance to their own. They
generally, therefore, choose to come upon the parish.

Whatever obstructs the free circulation of labour from one em-
ployment to another, obstructs that of stock likewise ; the quantity
of stock which can be employed in any branch of business depend-
ing very much upon that of the labour which can be employed in
it. Corporation laws, however, give less obstruction to the free
circulation of stock from one place to another than to that of labour.
It is everywhere much easier for a wealthy merchant to obtain the
privilege of trading in a town corporate, than for a poor artificer to
obtain that of working in it.

The obstruction which corporation laws give to the free circula-
tion of labour is common, I believe, to every part of Europe. That
which is given to it by the Poor-laws is, so far as I knovv> peculiar
to England. It consists in the difficulty which a poor man finds in
obtaining a settlement, or even in being allowed to exercise his in-
dustry in any parish but that to which he belongs. It is the labour
of artificers and manufacturers only of which the free circulation is

144 THE NATURE AND CAUSES OF BOOK i.

obstructed by corporation laws. The difficulty of obtaining settle-
ments obstructs even that of common labour. It may be worth
while to give some account of the rise, progress, and present state of
this disorder, the greatest perhaps of any in the police of England.

When by the destruction of monasteries the poor had been de-
prived of the charity of those religious houses, 1 after some other
ineffectual attempts for their relief, it was enacted by the 43rd of
Elizabeth, c. a, that every parish should be bound to provide for its
own poor ; and that overseers of the poor should be annually ap-
pointed, who, with .the churchwardens, should raise, by a parish
rate, competent sums for this purpose.

By this statute the necessity of providing for their own poor was
indispensably imposed upon every parish. Who were to be con-
sidered as the poor of each parish became, therefore, a question of
some importance. This question, after some variation, was at last
determined by the 13th and i4th of Charles II, when it was enacted
that forty days' undisturbed residence should gain any person a
settlement in any parish; but that within that time it should be
lawful for two justices of the peace, upon complaint made by the
churchwardens or overseers of the poor, to remove any new in-
habitant to the parish where he was last legally settled; unless he
either rented a tenement of ten pounds a year, or could give such
security for the discharge of the parish where he was then living,
as those justices should judge sufficient.

Some frauds, it is said, were committed in consequence of this
statute ; parish officers sometimes bribing their own poor to go
clandestinely to another parish, and by keeping themselves concealed
for forty days to gain a settlement there, to the discharge of that
to which they properly belonged. It was enacted, therefore, by the
ist of James II, that the forty days' undisturbed residence of any
person necessary to gain a settlement, should be accounted only
from the time of his delivering notice, in writing, of the place of his

1 It may be doubted whether the dis- But the extravagance of Henry VIII

solution of the monasteries was the cause and the issue of bane money in his and

of Pauperism in the reign of Elizabeth, his son's reigii, degraded the condition of

It had occurred more than sixty years the labouring classes ; and the adoption of

before the famous statute of Elizabeth sheep-fenning as opposed to the tillaee

was passed. Many causes contributed to of arable land, which seems to have been

tnw result. It possible that the dis- general in the latter half of the sixteenth

solution of the monasteries took away century, lowered their condition still

one outlet for a redundant population, more.

CHAP. x. ^TIIE WEALTH OF NATIONS. 145

abode and the number of his family, to one of the churchwardens
or overseers of the parish where he came to dwell.

But parish officers, it seems, were not always more honest with
regard to their own, than they had been with regard to other
parishes, and sometimes connived at such intrusions, receiving the
notice, and taking no proper steps in consequence of it. As every
person in a parish, therefore, was supposed to have an interest to
prevent as much as possible their being burdened by such intruders,
it was further enacted, by the 3rd of William III, that the forty
days' residence should be accounted only from the publication of
such notice in writing on Sunday in the church, immediately after
divine service.

c After all,' says Dr. Burn, 1 c this kind of settlement, by continuing
forty days after publication of notice in writing, is very seldom
obtained ; and the design of the Acts is not so much for gaining of
settlements, as for the avoiding of them, by persons coming into
a parish clandestinely : for the giving of notice is only putting
a force upon the parish to remove. But if a person's situation is
such, that it is doubtful whether he is actually removeable or not,
he shall by giving of notice compel the parish either to allow him
a settlement uncontested, by suffering him to continue forty days ;
or, by removing him, to try the right.'

This statute, therefore, rendered it almost impracticable for a poor
man to gain a new settlement in the old way, by forty days' in-
habitancy. But that it might not appear to preclude altogether
the common people of one parish from ever establishing themselves
with security in another, it appointed four other ways by which
a settlement might be gained without any notice delivered or pub-
lished. The first was, by being taxed to parish rates and paying
them ; the second, by being elected into an annual parish office and
serving in it a year ; the third, by serving an apprenticeship in the
parish ; the fourth, by being hired into service there for a year, and
continuing in the same service during the whole of it.

Nobody can get a settlement by either of the first two ways, but
by the public deed of the whole parish, who are too well aware of
the consequences to adopt any new-comer who has nothing but his
labour to support him, either by taxing him to parish rates, or by
electing him into a parish office.

1 Burn's Justice, art. Poor, vol. ii. p. 253, edit. 1764.
VOL. I. L

146 THE NATURE AND CAUSES OF BOOK i.

No married man can well gain any settlement in either of the two
last ways. An apprentice is scarce ever married ; and it is expressly
enacted, that no married servant shall gain any settlement by being
hired for a year. The principal effect of introducing settlement by
service, has been to put out in a great measure the old fashion of
hiring for a year, which before had been so customary in England,
that even at this day, if no particular term is agreed upon, the law
intends that every servant is hired for a year. But masters are not
always willing to give their servants a settlement by hiring them
in this manner ; and servants are not always willing to be so hired,
because as every last settlement discharges all the foregoing, they
might thereby lose their original settlement in the places of their
nativity, the habitation of their parents and relations. 1

No independent workman, it is evident, whether labourer or
artificer, is likely to gain any new settlement either by apprentice-
ship or by service. When such a person, therefore, carried his
industry to a new parish, he was liable to be removed, how healthy
and industrious soever, at the caprice of any churchwarden or over-
seer, unless he either rented a tenement of ten pounds a year, a thing
impossible for one who has nothing but his labour to live by ; or
could give such security for the discharge of the parish as two
justices of the peace should judge sufficient. What security they
shall require, indeed, is left altogether to their discretion ; but they
cannot well require less than thirty pounds, it having been enacted,
that the purchase even of a freehold estate of less than thirty pounds'
value shall not gain any person a settlement, as not being sufficient
for the discharge of the parish. But this is a security which scarce
any man who lives by labour can give ; and much greater security
is frequently demanded.

In order to restore in some measure that free circulation of labour
which those different statutes had almost entirely taken away, the
invention of certificates was fallen upon. By the 8th and 9th of
William III 2 it was enacted, that if any person should bring a certi-

1 Parish account-books frequently con- in itself a considerable portion of the
tain recognizances entered into between charge incurred for Poor-law relief. It
employers of labour and overseers, by is said that the pleading of these cases
which the former bind themselves under was the best means for obtaining a repu-
a penalty not to allow hired servants, tation for legal acuteness. The law of
takep. from any other parish, to obtain a parochial settlement, after various modi-
settlement. The enormous costs incurred fications, was practically abolished in
by litigation between parishes, in cases 1865.
where settlements were contested, formed a .Repealed in 1795.

CHAP. x. THE WEALTH OF NATIONS. 147

ficate from the parish where he was last legally settled, subscribed
by the churchwardens and overseers of the poor and allowed by two
justices of the peace, that every other parish should be obliged to
receive him ; that he should not be removeable merely upon account
of his being likely to become chargeable, but only upon his becoming
actually chargeable, and that then the parish which granted the
certificate should be obliged to pay the expense both of his main-
tenance and of his removal. And in order to give the most perfect
security to the parish where such certificated man should come to
reside, it was further enacted by the same statute, that he should
gain no settlement there by any means whatever, except either by
renting a tenement of ten pounds a year, or by serving upon his
own account in an annual parish office for one whole year ; and
consequently neither by notice, nor by service, nor by apprentice-
ship, nor by paying parish rates. By the 1 2th of Queen Anne too,
stat. i. c. 1 8, it was further enacted, that neither the servants nor
apprentices of such certificated man should gain any settlement in
the parish where he resided under such certificate.

How far this invention has restored that free circulation of labour
which the preceding statutes had almost entirely taken away, we
may learn from the following very judicious observation of Dr. Burn. 1
1 It is obvious,' says he, ' that there are divers good reasons for
requiring certificates with persons coming to settle in any place ;
namely, that persons residing under them can gain no settlement,
neither by apprenticeship, nor by service, nor by giving notice, nor
^7 P a y* n g parish rates ; that they can settle neither apprentices nor
servants ; that if they become chargeable, it is certainly known
whither to remove them, and the parish shall be paid for the
removal, and for their maintenance in the meantime ; and that if
they fall sick, and cannot be removed, the parish which gave the
certificate must maintain them : none of all which can be without
a certificate. Which reasons will hold proportionably for parishes
not granting certificates in ordinary cases; for it is fhr more than
an equal chance but that they will have the certificated persons
again, and in a worse condition.' The moral of this observation
seems to be, that certificates ought always to be required by the
parish where any poor man comes to reside, and that they ought
very seldom to be granted by that which he proposes to leave.
1 Burn's Justice, vol. ii. p. 274, edit. 1764,
L 3

148 THE NATURE AND CAUSES OF BOOK i.

* There is somewhat of hardship in this matter of certificates/ says
the same very intelligent author in his history of the Poor-laws,
( by putting it in the power of a parish officer to imprison a man as
it were for life ; however inconvenient it may be for him to continue
at that place where he has had the misfortune to acquire what is
called a settlement, or whatever advantage he may propose to him-
self by living elsewhere. 5

Though a certificate carries along with it no testimonial of good
behaviour, and certifies nothing but that the person belongs to the
parish to which li& really does belong, it is altogether discretionary
in the parish officers either to grant or to refuse it. A mandamus
was once moved for, says Dr. Burn, to compel the churchwardens
and overseers to sign a certificate ; but the Court of King's Bench
rejected the motion as a very strange attempt.

The very unequal price of labour which we frequently find in
England in places at no great distance from one another, is probably
owing to the obstruction which the law of settlements gives to
a poor man who would carry his industry from one parish to another
without a certificate. A single man, indeed, who is healthy and
industrious, may sometimes reside by sufferance without one ; but
a man with a wife and family who should attempt to do so, would
in most parishes be sure of being removed, and if the single man
should afterwards marry, he would generally be removed likewise.
The scarcity of hands in one parish, therefore, cannot always bo
relieved by their superabundance in another, as it is constantly in
Scotland, and, I believe, in all other countries where there is no
difficulty of settlement. In such countries, though wages may some-
times rise a little in the neighbourhood of a groat town, or where-
ever else there is an extraordinary demand for labour, and sink
gradually as the distance from such places increases, till they fall
back to the common rate of the country; yet we never meet with
those sudden and unaccountable differences in the wages of neigh-
bouring places which we sometimes find in England, where it is
often more difficult for a poor man to pass the artificial boundary
of a parish, than an arm of the sea or a ridge of high mountains,
natural boundaries which sometimes separate very distinctly different
rates of wages in other countries.

To remove a man who has committed no misdemeanour from the
parish where he chooses to reside, is an evident violation of natural

CHAP. x. THE WEALTH OF NATIONS. 149

liberty and justice. The common people of England, however, so
jealous of their liberty, but like the common people of most other
countries never rightly understanding wherein it consists, have now
for more than a century together suffered themselves to be exposed
to this oppression without a remedy. Though men of reflection too
have sometimes complained of the law of settlements as a public
grievance ; yet it has never been the object of any general popular
clamour, such as that against general warrants, an abusive practice
undoubtedly, but such a one as was not likely to occasion any
general oppression. There is scarce a poor man in England of forty
years of age, I will venture to say, who has not in some part of his
life felt himself most cruelly oppressed by this ill-contrived law of
settlements.

I shall conclude this long chapter with observing, that though
anciently it was usual to rate wages, first by general laws extending
over the whole kingdom, and afterwards by particular orders of the
justices of peace in every particular county, both these practices
have now gone entirely into disuse. * By the experience of above
four hundred years, 5 says Dr. Burn, ' it seems time to lay aside all
endeavours to bring under strict regulations, what in its own nature
seems incapable of minute limitation : for if all persons in the same
kind of work were to receive equal wages, there would be no emula-
tion, and no room left for industry or ingenuity.'

Particular Acts of Parliament, however, still attempt sometimes to
regulate wages in particular trades and in particular places. Thus the
8th of George III * prohibits under heavy penalties all master tailors
in London, and five miles round it, from giving, and their workmen
from accepting, more than two shillings and sevenpence halfpenny a
day, except in the case of a general mourning. AVhenever the legis-
lature attempts to regulate the differences between masters and their
workmen, its counsellors are always the masters. 2 When the regu-
lation, therefore, is in favour of the workmen, it is always just and
equitable ; but it is sometimes otherwise when iu favour of the

1 Repealed hi 1825. affected the poor and unrepresented

2 The reason is obvious, for the masters classes only, the latter imperilled those
alone had an effective voice in the legis- who could make themselves heard in
lature. The same reason will account Parliament. It is hardly necessary to
for that which Adam Smith expresses his say, that the justice of a legislature is
astonishment at above, the different feel- not to be so much relied on, as the
ing entertained against parochial settle- control of those who can constitute the
ment and general warrants. The former legislature itself.

150 THE NATURE AND CAUSES OF BOOK r.

masters. Thus the law which obliges the masters in several different
tradgs to pay their workmen in money and not in goods, is quite
just and equitable. It imposes no real hardship upon the masters.
It only obliges them to pay that value in money, which they pre-
tended to pay, but did not always really pay, in goods. 1 This law
is in favour of the workmen ; but the 8th of George III is in favour
of the masters. When masters combine together in order to reduce
the wages of their workmen, they commonly enter into a private bond
or agreement, not to give more than a certain wage under a certain
penalty. Were the workmen to enter into a contrary combination
of the same kind, not to accept of a certain wage under a certain
penalty, the law would punish them very severely ; and if it dealt
impartially, it would treat the masters in the same manner. But
the 8th of George III enforces by law that very regulation which
masters sometimes attempt to establish by such combinations. The
complaint of the workmen, that it puts the ablest and most indus-
trious upon the same footing with an ordinary workman, seems per-
fectly well founded. 2

In ancient times too it was usual to attempt to regulate the
profits of merchants and other dealers, by rating the price both
of provisions and other goods. The Assize of Bread is, so far as I
know, the only remnant of this ancient usage. Where there is an
exclusive corporation, it may perhaps be proper to regulate the price
of the first necessary of life. But where there is none, the competi-
tion will regulate it much better than any assize. 3 The method of
fixing the assize of bread established by the 3ist of George II could
not be put in practice in Scotland, on account of a defect in the

1 The truck system, alluded to in the cated as the effect of the statute alluded to.

text, is now uniformly illegal. If an 3 There is no reason to doubt that thin

employer pays in goods, he may be made statement is correct. But the Assize of

to pay the^ wages agreed on in money as Bread, one of the oldest statutes in the

well. It is probable that, in many cases, body of English law, provided only for the

the truck system saved the artisan or rate which the baker should charge for

labourer from the hands of retail dealers; his labour in making bread. The legis-

but the evils of the system were greater lature has not abandoned its privilege of

and more general than its indirect or fixing prices. It puts a maximum on

occasional benefits. railway fares, and attempts to define

a The complaint of the workman in rigidly the rate at which hackney car-
Adam Smith's time, is the complaint of riages should ply in the metropolis. It
the employer and the public now, under may be doubted however, in the latter
the operation of trades-unions. These case, whether it would not be better to
combinations, by their voluntary regula- allow the owner of the carringe to fix
tions, have put the workman into exactly his own fare, provided always that he
that position which the workman depre- put the rate conspicuously on his carriage.

CHAP. xi. THE WEALTH OF NATIONS. 151

law; its execution depending upon the office of clerk of the
market, which does not exist there. This defect was not remedied
till the 3rd of George III. 1 The want of an assize occasioned no
sensible inconveniency, and the establishment of one, in the few
places where it has yet taken place, has produced no sensible advan-
tage. In the greater part of the towns of Scotland, however, there
is an incorporation of bakers who claim exclusive privileges, though
they are not very strictly guarded.

The proportion between the different rates both of wages and
profit in the different employments of labour and stock, seems not
to be much affected, as has already been observed, by the riches or
poverty, the advancing, stationary, or declining state of the society.
Such revolutions in the public welfare, though they affect the
general rates of both wages and profit, must in the end affect them
equally in all different employments. The proportion between them,
therefore, must remain the same, and cannot well be altered, at least
for any considerable time, by any such revolutions.

CHAPTER XL

OF THE RENT OF LAND. 2

ENT, considered as the price paid for the use of land, is
naturally the highest which the tenant can afford to pay in
the actual circumstances of the land. In adjusting the terms of the
lease, the landlord endeavours to leave him no greater share of the

1 The London assize was repealed in vator, and that of the best, that is, the

1815. It still legally exists in country soil which produces the greatest amount

places, but is obsolete. at the least cost. A number of inferences

a J *. is well known that this part of have been drawn from this the so-called

Smith's work has been criticised by Kicardian theory of rent.
Anderson, West, Ricardo, and Mac- This view of the origin of rent could

culloch, who insist that rent is the price not have been unknown to Adam Smith,

paid for the natural and inherent qua- It is thus stated by Turgot, Sur la For-

lities or fertilities of the soil, and that ination et la Distribution des Richessea,

rent has arisen from the fact that as 10:

society has increased numerically, it has ' La terre se peuplait, et on la d&Vichait

become necessary to take inferior lands de plus en plus. Lea meilleures terres se

into cultivation. Hence, it is alleged, trouvorent a la longue toutes occupies;

rent is the difference between the pro- il ne resta plus pour lea derniers venus

duce of tlie poorest soil, that is, tho soil que des terrains steYiles, rebutes par les

which will only just remunerate the culti- premiers. Mais a la fin toute terre trouva

152

THE NATURE AND CAUSES OF

BOOK I.

produce than what is sufficient to keep up the stock from which he
furnishes the seed, pays the labour, and purchases and maintains
the cattle and other instruments of husbandry, together with the
ordinary profits of farming-stock in the neighbourhood. This is
evidently the smallest share with which the tenant can content
himself without being a loser, and the landlord seldom means to
leave him any more. Whatever part of the produce, or, what is the
same thing, whatever part of its price, is over and above this share,
he naturally endeavours to reserve to himself as the rent of his land,
which is evidently the highest the tenant can afford to pay in the
aetual circumstances of the land. Sometimes, indeed, the liberality,
more frequently the ignorance, of the landlord, makes him accept of
somewhat less than this portion ; and sometimes too, though more
rarely, the ignorance of the tenant makes him undertake to pay
somewhat more, or to content himself with somewhat less than the
ordinary profits of farming stock in the neighbourhood. This por-

son maitre, et ceux qui ne purent avoir
ties propridtes n'eurent cTabord d'autre
ressource que celle d'e'changer le travail
de leur bras dans les emplois de la clause
stipendiee contre le superfiu des denrees
du proprietaire culfcivateur.' As usual,
Adain Smith is much more in the right
than his critics are.

Bent arises from two causes, i. The
demand of population ; 2. The intelligence
of the agriculturist. Unless population
has so much increased as to enable the
producer of agricultural products to sell
them at a higher price than is sufficient
to reimburse him for his outlay and his
labour, no rent arises, however fertile
the land may be. Again, unless the skill
of the agriculturist be sufficient to raise
more than is sufficient to compensate and
maintain himself, he can pay no rent,
however paturally fertile the land may
be, and however urgent may be the de-
mand for his produce. Fertility and
agricultural skill, in short, are relative
terms, and precedent to the demands of
population^ It is absurd to say that the
pressure of population has constrained
the recourse to inferior soils, for the in*
creased productiveness of agriculture is
the cause and not the effect of increased
population.

The examination of the growth of rent
on the same plot of land during a long
period is quite sufficient proof of the
statements alleged by Adam Smith. Good

arable land, near a large town, let five
hundred years ago at 6d. an acre. It
lets now at 120 times as much. But the
price of its pioduce has not risen more
than nine times. The explanation of this
difference is not to be found in the occu-
pation of inferior soils, or in the pressure
of population, but in the improvement of
agriculture, and thereupon in the in-
creased value of that which Smith, with
great felicity of expression, calls the in-
strument of agriculture. The Ricardiaii
theory accounts for the difference between
the rent of one plot and the rent of
another; but as an explanation of rent
itself, it is neither novel nor true. Not
the first, because, as I have said, it is
found in Tur^ot ; not true, for it gives 110
explanation at all of the origin of that
which it professes to expound.

No better illustration can be given of
the utter futility of a deductive or a
priori method in Political Economy than
the Eicardian theory. Again, no better
illustration can be given of the great in-
ductive power of Adam Smith than his
explanation of the cause of rent. The
account in the text has its blemishes, but
they result from the circumstance that
Smith had a very imperfect set of facts,
though with his customary sagacity he
made more of a fact or two than his
critics could of a far larger set of ex-
periences*

CHAP. xi. THE WEALTH OF NATIONS. 153

tion, however, may still be considered as the natural rent of land,
or the rent for which it is naturally meant that land should for the
most part be let.

The rent of land, it may be thought, is frequently no more than
a reasonable profit or interest for the stock laid out by the landlord
upon its improvement. This, no doubt, may be partly the case upon
some occasions ; for it can scarce ever be more than partly the case.
The landlord demands a rent even for unimproved land, and the
supposed interest or profit upon the expense of improvement is
generally an addition to this original rent. Those improvements,
besides, are not always made by the stock of the landlord, but
sometimes by that of the tenant. When the lease comes to be
renewed, however, the landlord commonly demands the same aug-
mentation of rent, as if they had been all made by his own.

Ho sometimes demands rent for what is altogether incapable
of human improvement. Kelp is a species of sea- weed, which, when
burnt, yields an alkaline salt, useful for making glass, soap, and for
several other purposes. It grows in several parts of Great Britain,
particularly in Scotland, upon such rocks only as lie within the high-
water mark, which are twice every day covered with the sea, and of
which the produce, therefore, was never augmented by human in-
dustry. The landlord, however, whose estate is bounded by a kelp-
shore of this kind, demands a rent for it as much as for his corn-
fields.

The sea in the neighbourhood of the islands of Shetland is more
than commonly abundant in fish, which make a great part of the
subsistence of their inhabitants. But in order to profit by the
produce of the water, they must have a habitation upon the neigh-
bouring land. The rent of the landlord is in proportion, not to
what the farmer can make by the land, but to what he can make
both by the land and by the water. It is partly paid in sea-fish ;
and one of the very few instances in which rent makes a part of the
price of that commodity is to be found in that country.

The rent of land, therefore, considered as the price paid for the
use of the land, is naturally a monopoly price. It is not at all pro-
portioned to what the landlord may have laid out upon the improve-
ment of the land, or to what he can afford to take ; but to what the
farmer can afford to give.

Such parts only of the produce of land can commonly be brought

154 THE NATURE AND CAUSES OF BOOK r.

to market of which the ordinary price is sufficient to replace the
stock which must be employed in bringing them thither, together
with its ordinary profits. If the ordinary price is more than this,
the surplus part of it will naturally go to the rent of the land. If
it is not more, though the commodity may be brought to market,
it can afford no rent to the landlord. Whether the price is, or is not
more, depends upon the demand.

There are some parts of the produce of land for which the demand
must always be such as to afford a greater price than what is
sufficient to bring them to market ; and there are others for which
it either may or may not be such as to afford this greater price.
The former must always afford a rent to the landlord. The latter
sometimes may, and sometimes may not, according to different
circumstances.

Rent, it is to be observed, therefore, enters into the composition
of the price of commodities in a different way from wages and
profit. 1 High or low wages and profit are the causes of high or
low price ; high or low rent is the effect of it. It is because high
or low wages and profit must be paid, in order to bring a particular
commodity to market, that its price is high or low. But it is be-
cause its price is high or low ; a great deal more, or very little more,
or no more, than what is sufficient to pay those wages and profit,
that it affords a high rent, or a low rent, or no rent at all.

The particular consideration, first, of those parts of the produce
of land which always afford some rent; secondly, of those which
sometimes may and sometimes may not afford rent ; and, thirdly,
of the variations which, in the different periods of improvement,
naturally take place in the relative value of those two different
sorts of rude produce when compared both with one another and
with manufectured commodities, will divide this chapter into three
parts.

1 It is to be regretted that Smith stated pay. Of course if the laws of any country

in the text that rent enters into the com- so favour the landowner as to enable him

position of the price of commodities. He to exact a higher rent than he could ob-

must have seen clearly that the price of tain in the absence of any such favour, the

commodities would jnot be affected if no laws are bad, oppressive,' and indefensible,

rent at all were paid, and that therefore It is to be observed, however, that Smith

the landlord is under no sort of moral recognises the fact that rent is the effect

responsibility when he attempts to obtain and not the cause of price,
as high a rent as the tenant can afford to

CHAP. xr. THE WEALTH OF NATIONS. 155

PART I.

Of the Produce of Land which always affords Eent.

As men, like all other animals, naturally multiply in proportion
to the means of their subsistence, food is always, more or less, in
demand. It can always purchase or command a greater or smaller
quantity of labour, and somebody can always be found who is will-
ing to do something in order to obtain it. The quantity of labour,
indeed, which it can purchase, is not always equal to what it could
maintain, if managed in the most economical manner, on account
of the high wages which are sometimes given to labour. 1 But it
can always purchase such a quantity of labour as it can maintain,
according to the rate at which that sort of labour is commonly
maintained in the neighbourhood.

But land, in almost any situation, produces a greater quantity of
food than what is sufficient to maintain all the labour necessary for
bringing it to market, in the most liberal way in which that labour
is ever maintained. The surplus too is always more than sufficient
to replace the stock which employed that labour, together with its
profits. Something, therefore, always remains for a rent to the
landlord.

The most desert moors in Norway and Scotland produce some
sort of pasture for cattle, of which the milk and the increase are
always more than sufficient, not only to maintain all the labour
necessary for tending them, and to pay the ordinary profit to the
farmer or owner of the herd or flock ; but to afford some small rent
to the landlord. The rent increases in proportion to the goodness
of the pasture. The same extent of ground not only maintains a
greater number of cattle, but as they are brought within a smaller
compass, less labour becomes requisite to tend them and to collect
their produce. The landlord gains both ways ; by the increase of
the produce, and by the diminution of the labour which must be
maintained out of it. 2

1 That is to say, the rate of wages is up, educating, or training those, who will

often in excess of what is needed to sup- succeed him. Jn some way or other,

port the labourer, to insure him against directly or indirectly, the average rate of

the occasional incapacity of sickness, and wages must supply a fund for all these

the inevitable incapacity of old age, and requisites.

to supply him with the means for bringing a It does not follow that because land

156 THE NATURE AND CAUSES OF BOOK r.

The rent of land not only varies with its fertility, whatever be its
produce, but with its situation, whatever be its fertility. Land in
the neighbourhood of a town gives a greater rent than land equally
fertile in a distant part of the country. Though it may cost no more
labour to cultivate the one than the other, it must always cost more
to bring the produce of the distant land to market. A greater
quantity of labour, therefore, must be maintained out of it ; and
the surplus, from which are drawn both the profit of the farmer and
the rent of the landlord, must be diminished. But in remote parts
of the country the rate of profit, as has already been shown, is
generally higher than in the neighbourhood of a large town. A
smaller proportion of this diminished surplus, therefore, must belong
to the landlord.

Good roads, canals, and navigable rivers, by diminishing the ex-
pense of carriage, put the remote parts of the country more nearly
upon a level with those in the neighbourhood of the town. They
are upon that account the greatest of all improvements. They en-
courage the cultivation of the remote, which must always be the
most extensive circle of the country. They are advantageous to the
town, by breaking down the monopoly of the country in its neigh-
bourhood. They are advantageous even to that part of the country. 1
Though they introduce some rival commodities into the old market,
they open many new markets to its produce. Monopoly, besides,
is a great enemy to good management, which can never be uni-
versally established but in consequence of that free and universal
competition which forces everybody to have recourse to it for the
sake of self-defence. It is not more than fifty years ago that some
of the counties in the neighbourhood of London petitioned the
Parliament against the extension of the turnpike roads into the

appears to pay a rent, that it really does l What is true of roads and canals in

so. A farmer may occupy an estate, every any social community, is true of the whole

acre of which is nominally rented ; but world. The machinery by which the pro-

a portion of that rent which is paid for duce of remote countries can be carried to

the best land may be distributed over the distant markets is similar to that which,

worst. Does any portion of this land in the days of Adam Smith, made the

supply a surplus over the cost of produc- produce of country districts in England

tion ? If it does it pays rent. If not, it and Scotland capable of carriage to home

cannot be made to pay any rent at all. markets. Railroads and improvements in

Though, however, land may not bear a rent, the art of navigation have in the present

the tenant of land may be taxed, though day made the transit of the produce

he never can be made to pay any tax gathered in the American prairies as

until he is supplied with what is necessary accessible to the large English towns as

for maintenance, assurance from sickness, the produce of Lancashire and Yorkshire

and the sustenance of his descendants. was a century ago.

CHAP. XT. THE WEALTH OF NATIONS. 157

remoter counties. Those remoter counties, they pretended, from
the cheapness of labour, would he able to sell their grass and corn
cheaper in the London market than themselves, and would thereby
reduce their rents and ruin their cultivation. Their rents, how-
ever, have risen, and their cultivation has been improved since that
time.

A corn-field of moderate fertility produces a much greater quantity
of food for man than the best pasture of equal extent. Though its
cultivation requires much more labour, yet the surplus which re-
mains, after replacing the seed and maintaining all that labour, is
likewise much greater. Tf a pound of butcher's-meat, therefore,
was never supposed to be worth more than a pound of bread, this
greater surplus would everywhere be of greater value, and constitute
a greater fund both for the profit of the farmer and the rent of the
landlord. It seems to have done so universally in the rude begin-
nings of agriculture.

But the relative values of those two different species of food,
bread and butcher's-meat, are very different in the different periods
of agriculture. In its rude beginnings, the unimproved wilds,
which then occupy the far greater part of the country, are all
abandoned to cattle. There is more butcher's-meat than bread,
and bread, therefore, is the food for which there is the greatest
competition, and which consequently brings the greatest price. At
Buenos Ayres, we are told by Ulloa, 1 four reals, one-and-twenty-
pence halfpenny sterling, was, forty or fifty years ago, the ordinary
price of an ox, chosen from a herd of two or three hundred. He
says nothing of the price of bread, probably because he found
nothing remarkable about it. An ox there, he says, cost little
more than the labour of catching him. But corn can nowhere be
raised without a great deal of labour, and in a country which lies
upon the river Plate, at that time the direct road from Europe
to the silver mines of Potosi, the money price of labour could
not be very cheap. It is otherwise when cultivation is extended
over the greater part of the country. There is then more bread
than butcher's-meat. The competition changes its direction, and
the price of butcher's-meat becomes greater than the price of
bread.

By the extension besides of cultivation, the unimproved wilds

1 Liv. i. cap. 15.

158 THE NATURE AND CAUSES OF BOOKI.

become insufficient to supply the demand for butcher's-meat. A
great part of the cultivated lands must be employed in rearing
and fattening cattle, of which the price, therefore, must be suffi-
cient to pay, not only the labour necessary for tending them, but
the rent which the landlord and the profit which the farmer could
have drawn from such land employed in tillage. The cattle bred
upon the most uncultivated moors, when brought to the same
market, are, in proportion to their weight or goodness, sold at
the same price as those which are reared upon the most improved
land. The proprietors of those moors profit by it, and raise the
rent of their land in proportion to the price of their cattle. It
is not more than a century ago that in many parts of the High-
lands of Scotland, butcher's-meat was as cheap or cheaper than
even bread made of oatmeal. The Union opened the market
of England to the Highland cattle. Their ordinary price is at
present about three times greater than at the beginning of the
century, and the rents of many Highland estates have been tripled
and quadrupled in the same time. In almost every part of Great
Britain a pound of the best butcher's-meat is, in the present
times, generally worth more than two pounds of the best white
bread ; and in plentiful years it is sometimes worth three or four
pounds.

It is thus that in the progress of improvement the rent- and
profit of unimproved pasture come to be regulated in some measure
by the rent and profit of what is improved, and these again by
the rent and profit of corn. Corn is an annual crop ; butcher's-
meat, a crop which requires four or five years to grow. As an
acre of land, therefore, will produce a much smaller quantity of
the one species of food than of the other, the inferiority of the
quantity "must be compensated by the superiority of the price.
If it was more than compensated, more corn-land would be turned
into pasture ; and if it was not compensated, part of what was in
pasture would be brought back into corn.

This equality, however, between the rent and profit of grass
and those of corn; of the land of which the immediate produce
is food for cattle, and that of which the immediate produce is
food for men ; must be understood to take place only through
the greater part of the improved lands of a great country. In
some particular local situations it is quite otherwise, and the

CHAP. xi. THE WEALTH OF NATIONS. 159

rent and profit of grass are much superior to what can be made
by corn. 1

Thus in the neighbourhood of a great town, the demand for
milk and for forage to horses frequently contribute, together with
the high price of butcher's-meat, to raise the value of grass above
what may be called its natural proportion to that of corn. This
local advantage, it is evident, cannot be communicated to the lands
at a distance.

Particular circumstances have sometimes rendered some countries
so populous, that the whole territory, like the lands in the neigh-
bourhood of a great town, has not been sufficient to produce both
the grass and the corn necessary for the subsistence of their in-
habitants. Their lands, therefore, have been principally employed
in the production of grass, the more bulky commodity, and which
cannot be so easily brought from a great distance ; and corn, the
food of the great body of the people, has been chiefly imported
from foreign countries. Holland is at present in this situation,
and a considerable part of ancient Italy seems to have been so
during the prosperity of the Romans. To feed well, old Cato
said, as we are told by Cicero, was the first and most profitable
thing in the management of a private estate ; to feed tolerably
well, the second ; and to feed ill, the third. 2 To plough, he ranked
only in the fourth place of profit and advantage. Tillage, indeed,
in that part of ancient Italy which lay in the neighbourhood of
Rome, must have been very much discouraged by the distributions
of corn which were frequently made to the people, either gratuit-
ously or at a very low price. This corn was brought from the
conquered provinces, of which several, instead of taxes, were obliged
to furnish a tenth part of their produce at a stated price, about
sixpence a peck, to the republic. The low price at which this
com was distributed to the people, must necessarily have sunk
the price of what could be brought to the Roman market from
Latium, or the ancient territory of Rome, and must have dis-
couraged its cultivation in that country.

1 Grass land, i.e. natural pasture, increased in the former, partly in the fact

generally fetches a higher rent than that the produce of grass land is obtained

arable. The reason is partly to be found with far less cost than that of arable

in the fact that when countries are land.

densely peopled, the proportionate value 2 Cicero, De Officiis, ii. 25.
of weights of meat and bread is greatly

160 THE NATURE AND CAUSES OF BOOK i.

In an open country too, of which the principal produce is corn,
a well-enclosed piece of grass will frequently rent higher than
any corn-field in its neighbourhood. It is convenient for the
maintenance of the cattle employed in the cultivation of the corn,
and its high rent is, in this case, not so properly paid from the
value of its own produce, as from that of the corn-lands which
are cultivated by means of it. It is likely to fall, if ever the
neighbouring lands are completely enclosed. The present high
rent of enclosed land in Scotland seems owing to the scarcity of
enclosure, and will probably last no longer than that scarcity.
The advantage of enclosure is greater for pasture than for corn.
It saves the labour of guarding the cattle, which feed better too
when they are not liable to be disturbed by their keeper or his
dog.

But where there is no local advantage of this kind, the rent and
profit of corn, or whatever else is the common vegetable food of
the people, must naturally regulate, upon the land which is fit for
producing it, the rent and profit of pasture.

The use of the artificial grasses, of turnips, carrots, cabbages,
and the other expedients which have been fallen upon to make
an equal quantity of land feed a greater number of cattle than
when in natural grass, should somewhat reduce, it might be ex-
pected, the superiority which, in an improved country, the price
of butcher's-meat naturally has over that of bread. It seems
accordingly to have done so ; and there is some reason for be-
lieving that, at least in the London market, the price of butcher's-
meat in proportion to the price of bread is a good deal lower
in the present times than it was in the beginning of the last
century. 1

In the Appendix to the Life of Prince Henry, Dr. Birch 2 has
given us an account of the prices of butcher's-meat as commonly
paid by that prince. It is there said, that the four quarters of
an ox weighing six hundred pounds usually cost him nine pounds
ten shillings, or thereabouts; that is, thirty-one shillings and

1 It seems that the artificial grasses said that Townsend, after his rupture

were introduced into England at about with Walpole, and his retirement to

the commencement of the eighteenth Raynham, busied himself in introducing

century, at any rate the seed is adver- turnip-growing in Norfolk. Hume's Es-

tised as new in the Gazettes of that says.

time. Roots were introduced earlier, 2 Birch's Life of Henry, Prince of

and, as it appears, from Holland. It is Wales, p. 449.

CHAP. xi. THE WEALTH OF NATIONS. 161

eightpence per hundred pounds weight. Prince Henry died on
the 6th of November, 1612, in the nineteenth year of his age.

In March, 1764, there was a Parliamentary inquiry into the
causes of the high price of provisions at that time. It was then,
among other proof to the same purpose, given in evidence by a
Virginia merchant, that in March, 1763, he had victualled his
ships for twenty-four or twenty-five shillings the hundredweight
of beef, which he considered as the ordinary price ; whereas, in that
dear year, he had paid twenty-seven shillings for the same weight
and sort. This high price of 1764 is, however, four shillings and
eightpence cheaper than the ordinary price paid by Prince Henry;
and it is the best beef only, it must be observed, which is fit to be
salted for those distant voyages.

The price paid by Prince Henry amounts to ffll. per pound
weight of the whole carcase, coarse and choice pieces taken to-
gether ; and at that rate the choice pieces could not have been sold
by retail for less than 4^. or $d. the pound.

In the Parliamentary inquiry in 1764, the witnesses stated the
price of the choice pieces of best beef to be to the consumer 4/7. and
4%d. the pound ; and the coarse pieces in general to be from seven
farthings to i\d. and 2%<l. ; and this they said was in general one
halfpenny dearer than the same sort of pieces had usually been
sold in the month of March. But even this high price is still
a good deal cheaper than what we can well suppose the ordinary
retail price to have been in the time of Prince Henry.

During the twelve first years of the last century, the average
price of the best wheat at the Windsor market was ^i 18$. 3^7.
the quarter of nine Winchester bushels.

But in the twelve years preceding 1764, including that year,
the average price of the same measure of the best wheat at the
same market was ^2 I*. 9^.

In the twelve first years of the last century, therefore, wheat
appears to have been a good deal cheaper, and butcher's-meat a
good deal dearer, than in the twelve years preceding 1764, including
that year.

In all great countries the greater part of the cultivated lands
are employed in producing either food for men or food for cattle.
The rent and profit of these regulate the rent and profit of all
other cultivated land. If any particular produce afforded less, the

VOL. i. M

162 THE NATURE AND CAUSES OF BOOK i.

land would soon be turned into corn or pasture ; and if any afforded
more, some part of the lands in corn or pasture would soon be
turned to that produce.

Those productions, indeed, which require either a greater original
expense of improvement, or a greater annual expense of cultivation,
in order to fit the land for them, appear commonly to aiford, the one
a greater rent, the other a greater profit than corn or pasture.
This superiority, however, will seldom be found to amount to more
than a reasonable interest or compensation for this superior expense.

In a hop-gardenia fruit-garden, a kitchen-garden, both the rent
of the landlord and the profit of the farmer are generally greater
than in a corn or grass field. But to bring the ground into this
condition requires more expense. Hence a greater rent becomes
due to the landlord. It requires, too, a more attentive and skilful
management. Hence a greater profit becomes due to the farmer.
The crop, too, at least in the hop and fruit-garden, is more pre-
carious. Its price, therefore, before compensating all occasional
losses, must aiford something like the profit of insurance. The
circumstances of gardeners, generally mean, and always moderate,
may satisfy us that their great ingenuity is not commonly over-
recompensed. Their delightful art is practised by so many rich
people for amusement, that little advantage is to be made by those
who practise it for profit; because the persons who should naturally
be their best customers, supply themselves with all their most
precious productions.

The advantage which the landlord derives from such improve-
ments seems at no time to have been greater than what was
sufficient to compensate the original expense of making them.
In the ancient husbandry, after the vineyard, a well-watered
kitchen-garden seems to have been the part of the farm which
was supposed to yield the most valuable produce. But Demo-
critus, who wrote upon husbandry about two thousand years ago,
and who was regarded by the ancients as one of the fathers of the
art, thought they did not act wisely who enclosed a kitchen-
garden. The profit, he said, would not compensate the expense
of a stone wall ; and bricks (he meant, I suppose, bricks baked
in the sun) mouldered with the rain and the winter storm, and
required continual repairs. Columella, 1 who reports this judgment

1 De Ee Bustica, xi. cap. 3.

CHAP. xi. THE WEALTH OF NATIONS. 163

of Democritus, does not controvert it, but proposes a very frugal
method of enclosing with a hedge of brambles and briars, which,
he says, he had found by experience to be both a lasting and an
impenetrable fence ; but which, it seems, was not commonly known
in the time of Democritus. Palladius 1 adopts the opinion of
Columella, which had before been recommended by Varro. In the
judgment of those ancient improvers, the produce of a kitchen-
garden had, it seems, been little more than sufficient to pay the
extraordinary culture and the expense of watei'ing ; for in countries
so near the sun, it was thought proper, in those times as in the
present, to have the command of a stream of water, which could
be conducted to every bed in the garden. Through the greater
part of Europe, a kitchen-garden is not at present supposed to
deserve a better enclosure than that recommended by Columella.
In Great Britain, and some other Northern countries, the finer
fruits cannot be brought to perfection but by the assistance of a
wall. Their price, therefore, in such countries must be sufficient
to pay the expense of building and maintaining what they cannot
be had without. The fruit-wall frequently surrounds the kitchen-
garden, which thus enjoys the benefit of an enclosure which its own
produce would seldom pay for.

That the vineyard, when properly planted and brought to
perfection, was the most valuable part of the farm, seems to'have
been an undoubted maxim in the ancient agriculture, as it is in
the modern through all the wine countries. But whether it was
advantageous to plant a new vineyard, was a matter of dispute
among the ancient Italian husbandmen, as we learn from Columella. 2
He decides, like a true lover of all curious cultivation, in' favour
of the vineyard, and endeavours to show, by a comparison of the
profit and expense, that it was a most advantageous improvement.
Such comparisons, however, between the profit and expense of new-
projects are commonly very fallacious, and in nothing more so than
in agriculture. Had the gain actually made by such plantations
been commonly as great as he imagined it might have been, there
could have been no dispute about it. The same point is frequently
at this day a matter of controversy in the wine countries. Their
writers on agriculture, indeed, the lovers and promoters of high
cultivation, seem generally disposed to decide with Columella in
1 i. cap. 34. 2 De Be Bustica, iv. cap. 5.

M 3

164 THE NATURE AND CAUSES OF BOOK i.

favour of the vineyard. In France the anxiety of the proprietors
of the old vineyards to prevent the planting of any new ones, seems
to favour their opinion and to indicate a consciousness in those
who must have the experience, that this species of cultivation is at
present in that country more profitable than any other. It seems
at the same time, however, to indicate another opinion, that this
superior profit can last no longer than the laws which at present
restrain the free cultivation of the vine. In 1731, they obtained an
order of council, prohibiting both the planting of new vineyards
and the renewal of those old ones of which the cultivation had been
interrupted for two years, without a particular permission from the
king, to be granted only in consequence of an information from the
intendant of the province, certifying that he had examined the land,
and that it was incapable of any other culture. The pretence of
this order was the scarcity of corn and pasture, and the super-
abundance of wine. But had this superabundance been real, it
would, without any order of council, have effectually prevented
the plantation of new vineyards, by reducing the profits of this
species of cultivation below their natural proportion to those of
corn and pasture. With regard to the supposed scarcity of corn
occasioned by the multiplication of vineyards, corn is nowhere in
France more carefully cultivated than in the wine provinces, where
the land is fit for producing it ; as in Burgundy, Guienne, and in
Upper Languedoc. The numerous hands employed in the one
species of cultivation necessarily encourage the other, by affording
a ready market for its produce. To diminish the number of those
who are capable of paying for it, is surely a most unpromising
expedient for encouraging the cultivation of corn. It is like
the policy which would promote agriculture by discouraging
manufactures.

The rent and profit of those productions, therefore, which require
either a greater original expense of improvement in order to fit the
land for them, or a greater annual expense of cultivation, though
often much superior to those of corn and pasture, yet when they do
no more than compensate such extraordinary expense, are in reality
regulated by the rent and profit of those common crops.

It sometimes happens, indeed, that the quantity of land which
can be fitted for some particular produce, is too small to supply the
effectual demand. The whole produce can be disposed of to those

CHAP. xr. THE WEALTH OF NATIONS. 165

who are willing to give somewhat more than what is sufficient to
pay the whole rent, wages, and profit necessary for raising and
bringing it to market, according to their natural rates, or according
to the rates at which they are paid in the greater part of other
cultivated land. The surplus part of the price which remains after
defraying the whole expense of improvement and cultivation may
commonly, in this case, and in this case only, bear no regular
proportion to the like surplus in corn or pasture, but may exceed
it in almost any degree; and the greater part of this excess
naturally goes to the rent of the landlord.

The usual and natural proportion, for example, between the rent
and profit of wine and those of corn and pasture, must be under-
stood to take place only with regard to those vineyards which
produce nothing but good common wine, such as can be raised
almost anywhere, upon any light, gravelly, or sandy soil, and
which has nothing to recommend it but its strength and whole-
someness. It is with such vineyards only that the common land
of the country can be brought into competition ; for with those of
a peculiar quality it is evident that it cannot.

The vine is more affected by the difference of soils than any other
fruit tree. From some it derives a flavour which no culture or
management can equal, it is supposed, upon any other. This
flavour, real or imaginary, is sometimes peculiar to the produce
of a few vineyards; sometimes it extends through the greater
part of a small district, and sometimes through a considerable part
of a large province. The whole quantity of such wines that is
brought to market falls short of the effectual demand, or the
demand of those who would be willing to pay the whole rent, profit,
and wages necessary for preparing and bringing them thither,
according to the ordinary rate, or according to the rate at which
they are paid in common vineyards. The whole quantity, therefore,
can be disposed of to those who are willing to pay more, which
necessarily raises the price above that of common wine. The
difference is greater or less, according as the fashionableness and
scarcity of the wine render the competition of the buyers more or
less eager. Whatever it be, the greater part of it goes to the rent
of the landlord. For though such vineyards are in general more
carefully cultivated than most others, the high price of the wine
seems to be, not so much the effect, as the cause of this careful

166 TEE NATURE AND CAUSES OF BOOK i.

cultivation. In so valuable a produce the loss occasioned by
negligence is so great as to force even the most careless to attention.
A small part of this high price, therefore, is sufficient to pay the
wages of the extraordinary labour bestowed upon their cultivation,
and the profits of the extraordinary stock which puts that labour
into motion.

The sugar colonies possessed by the European nations in the
West Indies may be compared to those precious vineyards. Their
whole produce falls short of the effectual demand of Europe, and
can be disposed of to those who are willing to give more than what
is sufficient to pay the whole rent, profit, and wages necessary for
preparing and bringing it to market, according to the rate at which
they are commonly paid by any other produce. In Cochin China
the finest white sugar commonly sells for three piastres the quintal,
about thirteen shillings and sixpence of our money, as we are told
by M. Poivre,* a very careful observer of the agriculture of that
country. What is there called the quintal weighs from a hundred
and fifty to two hundred Paris pounds, or a hundred and seventy-
five Paris pounds at a medium, which reduces the price of the
hundredweight English to about eight shillings sterling, not a
fourth part of what is commonly paid for the brown or muskavada
sugars imported from our colonies, and not a sixth part of what is
paid for the finest white sugar. The greater part of the cultivated
lands in Cochin China are employed in producing corn and rice, the
food of the great body of the people. The respective prices of corn,
rice, and sugar are there probably in the natural proportion, or in
that which naturally takes place in the different crops of the greater
part of cultivated land, and which recompenses the landlord and
farmer, as nearly as can be computed, according to what is usually
the original expense of improvement and the annual expense of
cultivation. But in our sugar colonies the price of sugar bears
no such proportion to that of the produce of a rice or corn-field
either in Europe or in America. It is commonly said that a sugar
planter expects that the rum and the molasses should defray the
whole expense of his cultivation, and that his sugar should be all
clear profit. If this be true, for I pretend not to affirm it, it is as
if a corn farmer expected to defray the expense of his cultivation
with the chaff and the straw, and that the grain should be all clear

* Voyages (Tun Philosophe.

CHAP. xi. THE WEALTH OF NATIONS. 167

profit. We see frequently societies of merchants in London and
other trading towns purchase waste lands in our sugar colonies,
which they expect to improve and cultivate with profit by means of
factors and agents; notwithstanding the great distance and the
uncertain returns, from the defective administration of justice in
those countries. Nobody will attempt to improve and cultivate
in the same manner the most fertile lands of Scotland, Ireland, or
the corn provinces of North America ; though from the more exact
administration of justice in these countries, more regular returns
might be expected. 1

In Virginia and Maryland the cultivation of tobacco is preferred,
as more profitable, to that of corn. Tobacco might be cultivated
with advantage through the greater part of Europe ; but in almost
every part of Europe it has become a principal subject of taxation,
and to collect a tax from every different farm in the country where
this plant might happen to be cultivated, would be more difficult, it
has been supposed, than to levy one upon its importation at the
custom-house. The cultivation of tobacco has upon this account
been most absurdly prohibited through the greater part of Europe,
whicli necessarily gives a sort of monopoly to the countries where it
is allowed; and as Virginia and Maryland produce the greatest
quantity of it, they share largely, though with some competitors, in
the advantage of this monopoly. The cultivation of tobacco, how-
ever, seems not to be so advantageous as that of sugar. I have
never even heard of any tobacco plantation that was improved and
cultivated by the capital of merchants who resided in Great Britain,
and our tobacco colonies send us home no such wealthy planters as
we see frequently arrive from our sugar islands. Though from the
preference given in those colonies to the cultivation of tobacco above
that of corn, it would appear that the effectual demand of Europe
for tobacco is not completely supplied, it probably is more nearly so
than that for sugar : and though the present price of tobacco is

1 It is hardly necessary to say that the islands ; the abolition of colonial protec-

facts alluded to in the text are no longer tion in 1846, by putting the produce of

characteristic of the West India plan- British plantations on the same footing

tations. The sugar-growing islands were with that of foreign settlements, may

protected under the colonial system from have hurried their decadence, and the

competition, and were cultivated by slave competition of beet-root sugar, destined

labour. Hence they enjoyed an arti- perhaps ultimately to supersede that of

ficial prosperity. Slavery, as is always the cane, may have been the cause of this

the case, though temporarily ad van- change from extreme prosperity to great

tageous, was ultimately harmful to these depression.

168 THE NATURE AND CAUSES OF BOOK i.

probably more than sufficient to pay the whole rent, wages, and
profit necessary for preparing and bringing it to market, according
to the rate at which they are commonly paid in corn land ; it must
not be so much more as the present price of sugar. Our tobacco
planters, accordingly, have shown the same fear of the super-
abundance of tobacco, which the proprietors of the old vineyards
in France have of the superabundance of wine. By act of
Assembly they have restrained its cultivation to six thousand
plants, supposed to yield a thousand weight of tobacco for every
negro between sixteen and sixty years of age. Such a negro, over
and above this quantity of tobacco, can manage, they reckon, four
acres of Indian corn. To prevent the market from being over-
stocked too, they have sometimes, in plentiful years, we are told by
Dr. Douglas * (I suspect he has been ill informed), burnt a certain
quantity of tobacco for every negro, in the same manner as the
Dutch are said to do of spices. If such violent methods are
necessary to keep up the present price of tobacco, the superior
advantage of its culture over that of corn, if it still has any,
will not probably be of long continuance.

It is in this manner that the rent of the cultivated land, of which
the produce is human food, regulates the rent of the greater part of
other cultivated land. No particular produce can long afford less ;
because the land would immediately be turned to another use : and
if any particular produce commonly affords more, it is because the
quantity of land which can be fitted for it is too small to supply the
effectual demand.

In Europe corn is the principal produce of land which serves
immediately for human food. Except in particular situations,
therefore, the rent of corn land regulates in Europe that of all other
cultivated land. Britain need envy neither the vineyards of France
nor the olive plantations of Italy. Except in particular situations,
the value of these is regulated by that of corn, in which the ferti-
lity of Britain is not much inferior to that of either of those two
countries.

If in any country the common and favourite vegetable food of

the people should be drawn from a plant of which the most common

land, with the same or nearly the same culture, produced a much

greater quantity than the most fertile does of corn, the rent of the

* Summary, vol. ii. pp. 372, 373.

CHAP. xi. THE WEALTH OF NATIONS. 169

landlord, or the surplus quantity of food which would remain to
him after paying the labour and replacing the stock of the farmer
together with its ordinary profits, would necessarily be much
greater. Whatever was the rate at which labour was commonly
maintained in that country, this greater surplus could always main-
tain a greater quantity of it, and consequently enable the landlord
to purchase or command a greater quantity of it. The real value of
his rent, his real power and authority, his command of the neces-
saries and conveniences of life with which the labour of other people
could supply him, would necessarily be much greater.

A rice-field produces a much greater quantity of food than the
most fertile corn-field. Two crops in the year, from thirty to sixty
bushels each, are said to be the ordinary produce of an acre. Though
its cultivation, therefore, requires more labour, a much greater sur-
plus remains after maintaining all that labour. In those rice
countries, therefore, where rice is the common and favourite
vegetable food of the people, and where the cultivators are chielly
maintained with it, a greater share of this greater surplus should
belong to the landlord than in corn countries. 1 In Carolina, where
the planters, as in other British colonies, are generally both farmers
and landlords, and where rent consequently is confounded with
profit, the cultivation of rice is found to be more profitable than
that of corn, though their fields produce only one crop in the
year, and though, from the prevalence of the customs of Europe,
rice is not there the common and favourite vegetable food of the
people.

A good rice-field is a bog at all seasons, and at one season a bog
covered with water. It is unfit either for corn, or pasture, or vine-
yard, or indeed for any other vegetable produce that is very useful

1 Upon this passage Mr. Macculloch any country, all land were of equal ferti-
appends the following note : - ' In point lity, no rent would be exigible, but that
of fact, however, no portion of this sur- in case a piece of land less fertile than
plus will go to the landlord, unless the that already existent were added or re-
rice-fields under cultivation be of dif- claimed, rent would immediately arise?
fereirt productive powers. The best The fact is, the Eicardian theory accounts
lands in Indiana are probably as fertile for the difference between one quantity
as the best lands in East Lothian, and of rent and another, and explains the fact
yet they yield no surplus in the shape that some land will not yield rent, but it
of rent to the proprietors ; nor will they does not account for the origin of modern
ever yield any, unless inferior lands be rents at all. These have arisen entirely
taken into tillage.' This is the Ricardian from such improvements in agriculture
theory of rent pushed into sheer non- as have lessened the cost of production,
sense. Can any person believe that if, in

170 THE NATURE AND CAUSES OF BOOK i.

to men : and the lands which are fit for those purposes are not fit
for rice. Even in the rice countries, therefore, the rent of rice
lands cannot regulate the rent of the other cultivated land which
can never be turned to that produce.

The food produced by a field of potatoes is not inferior in quan-
tity to that produced by a field of rice, and much superior to what
is produced by a field of wheat. Twelve thousand weight of
potatoes from an acre of land is not a greater produce than two
thousand weight of wheat. The food or solid nourishment, indeed,
which can be drawn from each of those two plants, is not altogether
in proportion to their weight, on account of the watery nature of
potatoes. Allowing, however, half the weight of this root to go to
water, a very large allowance, such an acre of potatoes will still
produce six thousand weight of solid nourishment, three times the
quantity produced by the acre of wheat. An acre of potatoes is
cultivated with less expense than an acre of wheat ; the fallow,
which generally precedes the sowing of wheat, more than compen-
sating the hoeing and other extraordinary culture which is always
given to potatoes. Should this root ever become in any part of
Europe, like rice in some rice countries, the common and favourite
vegetable food of the people, so as to occupy the same proportion of
the lands in tillage which wheat and other sorts of grain for human
food do at present, the same quantity of cultivated land would
maintain a much greater number of people, and the labourers being
generally fed with potatoes, a greater surplus would remain after
replacing all the stock and maintaining all the labour employed in
cultivation. A greater share of this surplus too would belong to the
landlord. Population would increase, and rents would rise much
beyond what they are at present. 1

The land which is fit for potatoes is fit for almost every other
useful vegetable. If they occupied the same proportion of culti-
vated land which corn does at present, they would regulate, in

1 The statement in the text is illus- has been more unfortunate for the Irish
trated by the cottier rents of the Irish people than the habit of living en pota-
peasantry, which, under the system of toes. They were constantly exposed to
competition permitted or encouraged by dearth, occasionally to famine, their
the landowners, the precarious character miseries having culminated in the autumn
of the tenure, the cheapness of tho food of 1845 and the spring of 1846, when the
produced in average years, and the con- disease occurred to the potato. This
sequent growth of population, were in- disease, however, overthrew the Corn-
creased to an unnatural height. Nothing laws.

CHAP. xi. THE WEALTH OF NATIONS. 171

the same manner, the rent of the. greater part of other cultivated
land.

In some parts of Lancashire it is pretended, I have heen told,
that bread of oatmeal is a heartier food for labouring people than
wheaten bread, and I have frequently heard the same doctrine held
in Scotland. I am, however, somewhat doubtful of the truth of it.
The common people in Scotland, who are fed with oatmeal, are in
general neither so strong nor so handsome as the same rank of
people in England, who are fed with wheaten bread. They neither
work so well, nor look so well; and as there is not the same
difference between the people of fashion in the two countries, expe-
rience would seem to show that the food of the common people in
Scotland is not so suitable to the human constitution as that of
their neighbours of the same rank in England. But it seems to be
otherwise with potatoes. The chairmen, porters, and coalheavers in
London, and those unfortunate women who live by prostitution, the
strongest men and the most beautiful women perhaps in the British
dominions, are said to be, the greater part of them, from the lowest
rank of people in Ireland, who arc generally fed with this root.
No food can afford a more decisive proof of its nourishing quality,
or of its being peculiarly suitable to the health of the human
constitution.

It is difficult to preserve potatoes through the year, and impos-
sible to store them, like corn, for two or three years together. The
fear of not being able to sell them before they rot discourages their
cultivation, and is, perhaps, the chief obstacle to their ever be-
coming in any great country, like bread, the principal vegetable
food for all the different ranks of the people.

PART II.

Of the Produce of Land which sometimes does> and sometimes does not,

afford Sent.

HUMAN food seems to be the only produce of Land which always
and necessarily affords some rent to the landlord. Other sorts of
produce sometimes may and sometimes may not, according to
different circumstances.

172 THE NATURE AND CAUSES OF BOOK i.

After food, clothing and lodging are the two great wants of
mankind.

Land in its original rude state can afford the materials of clothing
and lodging to a much greater number of people than it can feed.
In its improved state it can sometimes feed a greater number of
people than it can supply with those materials ; at least in the way
in which they require them, and are willing to pay for them. In
the one state, therefore, there is always a superabundance of those
materials, which are frequently, upon that account, of little or no
value. In the other there is often a scarcity, which necessarily
augments their value. In the one state a great part of them is
thrown away as useless, and the price of what is used is considered
as equal only to the labour and expense of fitting it for use, and
can, therefore, afford no rent to the landlord. In the other they
are all made use of, and there is frequently a demand for more than
can be had. Somebody is always willing to give more for every
part of them than what is sufficient to pay the expense of bringing
them to market. Their price, therefore, can always afford some
rent to the landlord.

The skins of the larger animals were the original materials
of clothing. Among nations of hunters and shepherds, therefore,
whose food consists chiefly in the flesh of those animals, every man,
by providing himself with food, provides himself with the materials
of more clothing than he can wear. If there was no foreign com-
merce, the greater part of them would be thrown away as things of
no value. This was probably the ease among the hunting nations
of North America, before their country was discovered by the
Europeans, with whom they now exchange their surplus peltry for
blankets, firearms, and brandy, which gives it some value. In the
present commercial state of the known world, the most barbarous
nations, I believe, among whom landed property is established,
have some foreign commerce of this kind, and find among their
wealthier neighbours such a demand for all the materials of clothing
which their land produces, and which can neither be wrought up
nor consumed at home, as raises their price above what it costs to
send them to those wealthier neighbours. It affords, therefore,
some rent to the landlord. When the greater part of the Highland
cattle were consumed on their own hills, the exportation of their
hides made the most considerable article of the commerce of that

CHAP. XL THE WEALTH OF NATIONS. 173

country, .and what they were exchanged for afforded some addition
to the rent of the Highland estates. The wool of England, which
in old times could neither be consumed nor wrought up at home,
found a market in the then wealthier and more industrious country
of Flanders, and its price afforded something to the rent of the
land which produced it. 1 In countries not better cultivated than
England was then, or than the Highlands of Scotland are now, and
which had no foreign commerce, the materials of clothing would
evidently be so superabundant that a great part of them would be
thrown away as useless, and no part could afford any rent to the
landlord.

The materials of lodging catlnot always be transported to so great
a distance as those of clothing, and do not so readily become an
object of foreign commerce. When they are superabundant in the
country which produces them, it frequently happens, even in the
present commercial state of the world, that they are of no value to
the landlord. A good stone quarry in the neighbourhood of London
would afford a considerable rent ; in many parts of Scotland and
Wales it affords none. Barren timber for building is of great value
in a populous and well-cultivated country, and the land which pro-
duces it affords a considerable rent ; but in many parts of North
America the landlord would be much obliged to anybody who would
carry away the greater part of his large trees. In some parts of
the Highlands of Scotland the bark is the only part of the wood
which, for want of roads and water-carriage, can be sent to market :
the timber is left to rot upon the ground. When the materials of
lodging are so superabundant, the part made use of is worth only
the labour and expense of fitting it for that use. It affords no
rent to the landlord, who generally grants the use of it to whoever
takes the trouble of asking it. The demand of wealthier nations,
however, sometimes enables him to get a rent for it. The paving
of the streets of London has enabled the owners of some barren

1 So much so, indeed, that the chief Third's hold on the Low Countries was

wealth of this country consisted in its due to this commercial reciprocity ; and

exports of wool, the price of which was, Henry the Seventh put a stop to the

relatively to that of corn, very high. plots of the Yorkist exiles in Burgundy

The supply of wool to Flanders was the by establishing the intercursus magnus

source, for generations, of those relations between this country and the Flemings,

between England and the Low Countries For the prices of wool in the middle ages,

which form, so to speak, the beginnings see the Editor's Agriculture and Prices,
of diplomatic negotiations. Edward the

174 THE NATURE AND CAUSES OF BOOK r.

rocks on the coast of Scotland to draw a rent from what never
afforded any before. The woods of Norway and of the coast of the
Baltic find a market in many parts of Great Britain which they
could not find at home, and thereby afford some rent to their pro-
prietors.

Countries are populous, not in proportion to the number of
people whom their produce can clothe and lodge, but in proportion
to that of those whom it can feed. When food is provided, it is
easy to find the necessary clothing- and lodging*. But though
these are at hand,- it may often be difficult to find food. In some
parts even of the British dominions what is called a House may
be built by one day's labour of one man. The simplest pieces
of clothing, the skins of animals, requires somewhat more labour
to dress and prepare them for use. They do not, however, require
a great deal. Among savage and barbarous nations, a hundredth
or little more than a hundredth part of the labour of the whole
year will be sufficient to provide them with such clothing and
lodging as satisfy the greater part of the people. All the other
ninety-nine parts are frequently no more than enough to provide
them with food.

But when by the improvement and cultivation of land the
labour of one family can provide food for two, the labour of half
the society becomes sufficient to provide food for the whole. The
other half, therefore, or at least the greater part of them, can
be employed in providing other things, or in satisfying the other
wants and fancies of mankind. Clothing and lodging, household
furniture, and what is called Equipage, are the principal objects
of the greater part of those wants and fancies. The rich man
consumes no more food than his poor neighbour. In quality it
may be very different, and to select and prepare it may require
more labour and art ; but in quantity it is very nearly the same.
But compare the spacious palace and great wardrobe of the one,
with the hovel and few rags of the other, and you will be
sensible that the difference between their clothing, lodging, and
household furniture, is almost as great in quantity as it is in
quality. The desire of food is limited in every man by the narrow
capacity of the human stomach ; but the desire of the conveniences
and ornaments of building, dress, equipage, and household furniture,
seems to have no limit or certain boundary. Those, therefore,

CHAP. xi. THE WEALTH OF NATIONS. 175

who have the command of more food than they themselves can
consume, are always willing 1 to exchange the surplus, or, what
is the same thing, the price of it, for gratifications of this other
kind. What is over and above satisfying the limited desire, is
given for the amusement of those desires which cannot be satisfied,
but seem to be altogether endless. The poor, in order to obtain
food, exert themselves to gratify those fancies of the rich ; and
to obtain it more certainly, they vie with one another in the
cheapness and perfection of their work. The number of workmen
increases with the increasing quantity of food, or with the growing
improvement and cultivation of the lands ; and as the nature of
their business admits of the utmost subdivisions of labour, the
quantity of materials which they can work up increases in a much
greater proportion than their numbers. Hence arises a demand
for every sort of material which human invention can employ,
either usefully or ornamentally, in building, dress, equipage, or
household furniture; for the fossils and minerals contained in
the bowels of the earth; the precious metals, and the precious
stones.

Food is in this manner not only the original source of rent, but
every other part of the produce of land w r hich afterwards affords
rent derives that part of its value from the improvement of the
powers of labour in producing food by means of the improvement
and cultivation of land.

Those other parts of the produce of land, however, which after-
wards afford rent, do not afford it always. Even in improved and
cultivated countries, the demand for them is not always such as to
afford a greater price than what is sufficient to pay the labour, and
replace, together with its ordinary profits, the stock which must be
employed in bringing them to market. Whether it is or is not
such, depends upon different circumstances.

Whether a coal mine, for example, can afford any rent, depends
partly upon its fertility, and partly upon its situation.

A mine of any kind may be said to be either fertile or barren,
according as the quantity of mineral which can be brought from
it by a certain quantity of labour, is greater or less than what can
be brought by an equal quantity from the greater part of other
mines of the same kind.

Some coal mines advantageously situated cannot be wrought on

176 THE NATURE AND CAUSES OF BOOK i.

account of their barrenness. The produce does not pay the expense.
They can afford neither profit nor rent.

There are some of which the produce is barely sufficient to pay
the labour, and replace, together with its ordinary profits, the stock
employed in working them. They afford some profit to the under-
taker of the work, but no rent to the landlord. They can be
wrought advantageously by nobody but the landlord, who being
himself undertaker of the work, gets the ordinary profit of the
capital which he employs in it. Many coal mines in Scotland are
wrought in this manner, and can be wrought in no other. The
landlord will alloifr nobody else to work them without paying some
rent, and nobody can afford to pay any.

Other coal mines in the same country, sufficiently fertile, cannot
be wrought on account of their situation. A quantity of mineral
sufficient to defray the expense 'of working could be brought
from the mine by the ordinary or even less than the ordinary
quantity of labour : but in an inland country, thinly inhabited, and
without either good roads or water-carriage, this quantity could
not be sold.

Coals are a less agreeable fuel than wood : they arc said too to
be less wholesome. The expense of coals, therefore, at the place
where they are consumed, must generally be somewhat less than
that of wood.

The price of wood, again, varies with the state of agriculture,
nearly in the same manner, and exactly for the same reason, as
the price of cattle. In its rude beginnings the greater part of
every country is covered with wood, which is then a mere in-
cumbrance of no value to the landlord, who would gladly give it
to anybody for the cutting. As agriculture advances, the woods
are partly cleared by the progress of tillage, and partly go to
decay in consequence of the increased number of cattle. These,
though they do not increase in the same proportion as corn, which
is altogether the acquisition of human industry, yet multiply under
the care and protection of men; who store up in the season of
plenty what may maintain them in that of scarcity, who through
the whole year furnish them with a greater quantity of food than
uncultivated nature provides for them, and who by destroying and
extirpating their enemies, secure them in the free enjoyment of
all that she provides. Numerous herds of cattle, when allowed to

CHAP. xi. THE WEALTH OF NATIONS. 177

wander through the woods, though they do not destroy the old
trees, hinder any young ones from coming up, so that in the
course of a century or two the whole forest goes to ruin. The
scarcity of wood then raises its price. It affords a good rent,
and the landlord sometimes finds that he can scarce employ his
best lands more advantageously than in growing barren timber,
of which the greatness of the profit often compensates the late-
ness of the returns. This seems in the present times to be
nearly the state of things in several parts of Great Britain, where
the profit of planting is found to be equal to that of either corn
or pasture. The advantage which the landlord derives from
planting can nowhere exceed, at least for any considerable time,
the rent which these could afford him ; and in an inland country
which is highly cultivated, it will frequently not fall much short
of this rent. Upon the sea coast of a well-improved country,
indeed, if coals can conveniently be had for fuel, it may some-
times be cheaper to bring barren timber for building from less
cultivated foreign countries, than to raise it at home. In the
new town of Edinburgh, built within these few years, there is
not perhaps a single stick of Scotch timber.

Whatever may be the price of wood, if that of coals is such
that the expense of a coal fire is nearly equal to that of a wood one,
we may be assured, that at that place, and in these circumstances,
the price of coals is as high as it can be. It seems to be so in
some of the inland parts of England, particularly in Oxfordshire,
where it is usual, even in the fires of the common people, to mix
coals and wood together, and where the difference in the expense
of those two sorts of fuel cannot, therefore, be very great.

Coals, in the coal countries, are everywhere much below this
highest price. If they were not, they could not bear the expense
of a distant carriage, either by land or by water. A small quantity
only could be sold, and the coal masters and coal proprietors find
it more for their interest to sell a great quantity at a, price some-
what above the lowest, than a small quantity at the highest.
The most fertile coal mine, too, regulates the price of coals at
all the other mines in its neighbourhood. 1 Both the proprietor

Tin's statement can apply only to who can get coal the cheapest may under-
such cases as those in which the supply sell his neighbours, and force them either
of coal greatly exceeds the demand. TJn- to accept a lower rate of profit, or close
der such circumstances, the coal owner their pits. But the reverse is ordinarily

VOL. I. K

178 THE NATURE AND CA USES OF BOOK i

and the undertaker of the work find, the one that he can get a
greater rent, the other that he can get a greater profit, by some-
what underselling all their neighbours. Their neighbours are soon
obliged to sell at the same price, though they cannot so well afford
it, and though it always diminishes, and sometimes takes away
altogether both their rent and their profit. Some works are
abandoned altogether; others can afford no rent, and can be
wrought only by the proprietor.

The lowest price at which coals can be sold for any considerable
time, is, like that of all other commodities, the price which is
barely sufficient to replace, together with its ordinary profits, the
stock which must be employed in bringing them to market. At
a coal mine, for which the landlord can get no rent, but which
he must either work himself or let it alone altogether, the price
of coals must generally be nearly about this price.

Rent, even where coals afford one, has generally a smaller share
in their price that in that of most other parts of the rude produce
of land. The rent of an estate above-ground, commonly amounts
to what is supposed to be a third of the gross produce ; and it
is generally a rent certain and independent of the occasional
variations in the crop. In coal mines a fifth of the gross produce
is a very great rent ; a tenth the common rent, and it is seldom
a rent certain, but depends upon the occasional variations in the
produce. 1 These are so great, that in a country where thirty
years 5 purchase is considered as a moderate price for the property
of a landed estate, ten years' purchase is regarded as a good price
for that of a coal mine.

The value of a coal mine to the proprietor frequently depends
as much upon its situation as upon its fertility. That of a metallic
mine depends more upon its fertility, and less upon its situation.
The coarse, and, still more, the precious metals, when separated
from the ore, are so valuable that they can generally bear the
expense of a very long land and of the most distant sea carriage.

the case. The price of coal is deter- less than that in Smith's time. The rea-

mined not by the lowest rate at which son is that the cost of wages has so much

the produce of the best mine will sell, increased, that the proportion which the

but by the highest rate which the pro- landowner would have otherwise received

duce of the poorest mine will fetch, in rent, has not kept pace with the de-

In short, when the effectual demand is rnand for the produce. In the best

full, the poorest land in use determines districts the proportion received by the

the rent of the richer. landowner at present is said to be about

1 At present, the proportion is even one thirteenth.

CHAP. xi. THE WEALTH OF NATIONS. 179

Their market is not confined to the countries in the neighbour-
hood of the mine, but extends to the whole world. The copper
of Japan makes an article of commerce in Europe ; the iron of
Spain in that of Chili and Peru. The silver of Peru finds its way,
not only to Europe, but from Europe to China.

The price of coals in Westmoreland or Shropshire can have little
effect on their price at Newcastle ; and their price in the Lionnois
can have none at all. The productions of such distant coal mines
can never be brought into competition with one another. But the
productions of the most distant metallic mines frequently may, and
in fact commonly are. The price, therefore, of the coarse, and still
more that of the precious metals, at the most fertile mines in the
world, must necessarily more or less affect their price at every other
in it. The price of copper in Japan must have some influence upon
its price at the copper mines in Europe. The price of silver in
Peru, or the quantity either of labour or of other goods which it
will purchase there, must have some influence on its price, not
only at the silver mines of Europe, but at those of China. After
the discovery of the mines of Peru, the silver mines of Europe
were, the greater part of them, abandoned. 1 The value of silver
was so much reduced that their produce could no longer pay the
expense of working them, or replace with a profit, the food, clothes,
lodging, and other necessaries which were consumed in that
operation. This was the case, too, with the mines of Cuba and
St. Domingo, and even with the ancient mines of Peru, after the
discovery of those of Potosi.

The price of every metal at every mine, therefore, being regu-
lated in some measure by its price at the most fertile mine in the
world that is actually wrought, it can at the greater part of mines
do very little more than pay the expense of working, and can seldom
afford a very high rent to the landlord. Rent, accordingly, seems
at the greater part of mines to have but a small share in the price
of the coarse, and a still smaller in that of the precious metals.
Labour and profit make up the greater part of both.

A sixth part of the gross produce may be reckoned the average
rent of the tin mines of Cornwall, the most fertile that are known

1 At the present time a considerable in greater or less quantity. But this has

amount of silver is extracted in the been rendered possible by an economy in

United Kingdom from lead ores, in the process of reduction, effected by what

which the more precious metal is present is known as Pattison's Process.

N

180 THE NATURE AND CAUSES OF BOOK i.

in the world, as we are told by the Rev. Mr. Borlase, 1 Vice- Warden
of the Stannaries. Some, he says, afford more, and some do not
afford so much. A sixth part of the gross produce is the rent too
of several very fertile lead mines in Scotland.

In the silver mines of Peru, we are told by Frezier 2 and Ulloa, 3
the proprietor frequently exacts no other acknowledgment from the
undertaker of the mine, but that he will grind the ore at his mill,
paying him the ordinary multure or price of grinding. Till 1736,
indeed, the tax of the king of Spain amounted to one-fifth of the
standard silver, which till then might be considered as. the real rent
of the greater part of the silver mines of Peru, the richest which
have been known in the world. If there had been no tax, this fifth
would naturally have belonged to the landlord, and many mines
might have been wrought which could not then be wrought, because
they could not afford this tax. The tax of the Duke of Cornwall
upon tin is supposed to amount to more than five per cent., or one-
twentieth part of the value ; and whatever may be his proportion, it
would naturally too belong to the proprietor of the mine, if tin was
duty free. But if you add one-twentieth to one- sixth, you will find
that the whole average rent of the tin mines of Cornwall, was to
the whole average rent of the silver mines of Peru as thirteen to
twelve. But the silver mines of Peru are not now able to pay even
this low rent, and the tax upon silver was, in 1 736, reduced from
one-fifth to one-tenth. Even this tax upon silver too gives more
temptation to smuggling than the tax of one-twentieth upon tin ;
and smuggling must be much easier in the precious than in the
bulky commodity. The tax of the King of Spain accordingly is
said to be very ill paid, and that of the Duke of Cornwall very well.
Rent therefore, it is probable, makes a greater part of the price of
tin at the most fertile tin mines, than it does of silver at the most
fertile silver mines in the world. After replacing the stock employed
in working those different mines, together with its ordinary profits,
the residue which remains to the proprietor is greater it seems in
the coarse, than in the precious metal.

Neither are the profits of the undertakers of silver mines com-
monly very great in Peru. The same most respectable and well-

1 Natural History of Cornwall, p. 183. 3 See Ulloa's Noticias Americanas

* Vol. i. pp. 269 sqq. Entretenementos, 12-14.

CHAP. xi. THE WEALTH OF NATIONS. 181

informed authors acquaint us, that when any person undertakes to
work a new mine in Peru, he is universally looked upon as a man
destined to bankruptcy and ruin, and is upon that account shunned
and avoided by everybody. Mining, it seems, is considered there
in the same light as here, as a lottery, in which the prizes do not
compensate the blanks, though the greatness of some tempts many
adventurers to throw away their fortunes in such unprosperous
projects.

As the sovereign, however, derives a considerable part of his
revenue from the produce of silver mines, the law in Peru gives
every possible encouragement to the discovery and working of new
ones. Whoever discovers a new mine, is entitled to measure off two
hundred and forty-six feet in length, according to what he supposes
to be the direction of the vein, and half as much in breadth. He
becomes proprietor of this portion of the mine, and can work it
without paying any acknowledgment to the landlord. The interest
of the Duke of Cornwall has given occasion to a regulation nearly
of the same kind in that ancient duchy. In waste and unenclosed
lands any person who discovers a tin mine, may mark out its limits l
to a certain extent, which is called bounding a mine. The bounder
becomes the real proprietor of the mine, and may either work it
himself, or give it in lease to another, without the consent of the
owner of the land, to whom, however, a very small acknowledgment
must be paid upon working it. In both regulations the sacred
rights of private property are sacrificed to the supposed interests
of public revenue.

The same encouragement is given in Peru to the discovery and
working of new gold mines ; and in gold the king's tax amounts
only to a twentieth part of the standard metal. It was once a fifth,
and afterwards a tenth, as in silver ; but it was found that the work
could not bear even the lowest of these two taxes. If it is rare,
however, say the same authors, Frezier and Ulloa, to find a person
who has made his fortune by a silver, it is still much rarer to find
one who has done so by a gold mine. This twentieth part seems to
be the whole rent which is paid by the greater part of the gold
mines in Chili and Peru. Gold too is much more liable to be
smuggled than even silver; not only on account of the superior value
of the metal in proportion to its bulk, but on account of the peculiar
way in which nature produces it. Silver is very seldom found

182 THE NATURE AND CAUSES OF BOOK i.

virgin, but, like most other metals, is generally mineralized with
some other body, from which it is impossible to separate it in such
quantities as will pay for the expense, but by a very laborious and
tedious operation, which cannot well be carried on but in workhouses
erected for the purpose, and therefore exposed to the inspection of
the king's officers. Gold, on the contrary, is almost always found
virgin. It is sometimes found in pieces of some bulk ; and even
when mixed in small and almost insensible particles with sand,
earth, and other extraneous bodies, it can be separated from them by
a very short and simple operation, which can be carried on in any
private house by anybody who is possessed of a small quantity of
mercury. If the king's tax, therefore, is but ill paid upon silver, it
is likely to be much worse paid upon gold ; and rent must make
a much smaller part of the price of gold than even of that of silver.

The lowest price at which the precious metals can be sold, or the
smallest quantity of other goods for which they can be exchanged
during any considerable time, is regulated by the same principles
which fix the lowest ordinary price of all other goods. The stock
which must commonly be employed, the food, clothes, and lodging
which must commonly be consumed in bringing them from the
mine to the market, determine it. It must at least be sufficient to
replace that stock with the ordinary profits.

Their highest price, however, seems not to be necessarily deter-
mined by anything but the actual scarcity or plenty of those metals
themselves. It is not determined by that of any other commodity,
in the same manner as the price of coals is by that of wood, beyond
which no scarcity can ever raise it. Increase the scarcity of gold to
a certain degree, and the smallest bit of it may become more precious
than a diamond, and exchange for a greater quantity of other goods.

The demand for those metals arises partly from their utility, and
partly from their beauty. If you except iron, they are more useful
than perhaps any other metal. As they are less liable to rust and
impurity, they can more easily be kept clean ; and the utensils either
of the table or the kitchen are often upon that account more agree-
able when made of them. A silver boiler is more cleanly than a lead,
copper, or tin one; and the same quality would render a gold boiler
still better than a silver one. Their principal merit, however, arises
from their beauty, which renders them peculiarly fit for the ornaments
of dress and furniture. No paint or dye can give so splendid a colour

CHAP. xi. THE WEALTH OF NATIONS. 183

as gilding. The merit of their beauty is greatly enhanced by their
scarcity. With the greater part of rich people, the chief enjoyment
of riches consists in the parade of riches, which in their eyes is never
so complete as when they appear to possess those decisive marks of
opulence which nobody can possess but themselves. In their eyes
the merit of an object which is in any degree either useful or beauti-
ful, is greatly enhanced by its scarcity, or by the great labour which
it requires to collect any considerable quantity of it, a labour which
nobody can afford to pay but themselves. Such objects they are
willing to purchase at a higher price than things much more beau-
tiful and useful, but more common. These qualities of utility,
beauty, and scarcity, are the original foundation of the high price
of those metals, or of the great quantity of other goods for which
they can everywhere be exchanged. This value was antecedent to
and independent of their being employed as coin, and was the
quality which fitted them for that employment. That employment,
however, by occasioning a new demand, and by diminishing the
quantity which could bo employed in any other way, may have
afterwards contributed to keep up or increase their value.

The demand for the precious stones arises altogether from their
beauty. They are of no use but as ornaments ; and the merit of
their beauty is greatly enhanced by their scarcity, or by the diffi-
culty and expense of getting them from the mine. Wages and
profit accordingly make up, upon most occasions, almost the whole
of their high price. Rent comes in but for a very small share ;
frequently for no share ; and the most fertile mines only afford any
considarable rent. When Tavernier, 1 a jeweller, visited the diamond
mines of Golconda and Visiapour, he was informed that the sovereign
of the country, for whose benefit they were wrought, had ordered
all of them to be shut up, except those which yielded the largest
and finest stones. The others, it seems, were to the proprietor not
worth the working.

As the price both of the precious metals and of the nrecious stones
is regulated all over the world by their price at the most fertile
mine in it, the rent which a mine of either can afford to its pro-
prietor is in proportion, not to its absolute, but to what may be
called its relative fertility, or to its superiority over other mines of
the same kind. If new mines were discovered as much superior to
1 Indian Travels, book ii. chaps. 11-15.

THE NATURE AND CAUSES OF BOOK i.

those of Potosi as they were superior to those of Europe, the value
of silver might be so much degraded as to render even the mines of
Potosi not worth the working. Before the discovery of the Spanish
West Indies, the most fertile mines in Europe may have afforded as
great a rent to their proprietor as the richest mines in Peru do at
present. Though the quantity of silver was much less, it might have
exchanged for an equal quantity of other goods, and the proprietor's
share might have enabled him to purchase or command an equal
quantity either of labour or of commodities. The value both of the
produce and of the rent, the real revenue which they afforded both
to the public and to the proprietor, might have been the same.

The most abundant mines either of the precious metals or of the
precious stones could add little to- the wealth of the world. A
produce of which the value is principally derived from its scarcity,
is necessarily degraded by its abundance. A service of plate, and
the other frivolous ornaments of dress and furniture, could be
purchased for a smaller quantity of labour, or for a smaller quantity
of commodities ; and in this would consist the sole advantage which
the world could derive from that abundance.

It is otherwise in estates above ground. The value both of their
produce and of their rent is in proportion to their absolute and
not to their relative fertility. The land which produces a certain
quantity of food, clothes, and lodging, can always feed, clothe,
and lodge a certain number of people ; and whatever may be the
proportion of the landlord, it will always give him a proportion-
able command of the labour of those people, and of the commodities
with which that labour can supply him. The value of the most
barren lands is not diminished by the neighbourhood of the most
fertile. On the contrary, it is generally increased by it. The
great number of people maintained by the fertile lands afford
a market to many parts of the produce of the barren, which they
could never have found among those whom their own produce
could maintain.

Whatever increases the fertility of land in producing food, in-
creases not only the value of the lands upon which the improve-
ment is bestowed, but contributes likewise to increase that of many
other lands, by creating a new demand for their produce. That
abundance of food, of which, in consequence of the improvement of
land, many people have the disposal beyond what they themselves

CHAP. xi. THE WEALTH OF NATIONS. 185

can consume, is the great cause of the demand both for the precious
metals and the precious stones, as well as for every other con-
veniency and ornament of dress, lodging, household furniture, and
equipage. Food not only constitutes the principal part of the
riches of the world, but it is the abundance of food which gives
the principal part of their value to many other sorts of riches.
The poor inhabitants of Cuba and St. Domingo, when they were
first discovered by the Spaniards, used to wear little bits of gold
as ornaments in their hair and other parts of their dress. They
seemed to value them as we would do any little pebbles of some-
what more than ordinary beauty, and to consider them ass just
worth the picking up, but not worth the refusing to anybody who
asked them. They gave them to their new guests at the first
request, without seeming to think that they had made them any
very valuable present. They were astonished to observe the rage
of the Spaniards to obtain them ; and had no notion that there
could anywhere be a country in which many people had the disposal
of so great a superfluity of food, so scanty always among them-
selves, that for a very small quantity of those glittering baubles
they would willingly give as much as might maintain a whole
family for many years. Could they have been made to understand
this, the passion of the Spaniards would not have surprised them.

PART III.

Of the Variations in the Proportion letwecn the respective Values of
that sort of Produce which always affords Rent, and of that which
sometimes does and sometimes does not afford Rent.

THE increasing abundance of food, in consequence of increasing
improvement and cultivation, must necessarily increase the demand
for every part of the produce of land which is not food, and which
can be applied either to use or to ornament. In the whole progress
of improvement, it might therefore be expected there should be
only one variation in the comparative values of those two different
sorts of produce. The value of that sort which sometimes does and
sometimes does not afford rent, should constantly rise in proportion
to that which always affords some rent. As art and industry
advance, the materials of clothing and lodging, the useful fossils

186 TEE NATURE AND CAUSES OF BOOK i.

and minerals of 'the earth, the precious metals and the precious
stones should gradually come to be more and more in demand,
should gradually exchange for a greater and greater quantity
of food, or in other words, should gradually become dearer and
dearer. This accordingly has been the case with most of these
things upon most occasions, and would have been the case with all
of them upon all occasions, if particular accidents had not upon some
occasions increased the supply of some of them in a still greater
proportion than the demand.

The value pf a freestone quarry, for example, will necessarily
increase with the increasing improvement and population of the
country round about it ; especially if i{ should be the only one
in the neighbourhood. But the value of a silver mine, even
though there should not be another within a thousand miles of
it, will not necessarily increase with the improvement of the
country in which it is situated. The market for the produce of
a freestone quarry can seldom extend more than a few miles round
about it, and the demand must generally be in proportion to the
improvement and population of that small district. But the market
for the produce of a silver mine may extend over the whole known
world. Unless the world in general, therefore, be advancing in
improvement and population, the demand for silver might not be at
all increased by the improvement even of a large country in the
neighbourhood of the mine. Even though the world in general
were improving, yet, if in the course of its improvement new mines
should be discovered much more fertile than any which had been
known before, though the demand for silver would necessarily
increase, yet the supply might increase in so much a greater pro-
portion, that the real price of that metal might gradually fall ; that
is, any given quantity, a pound weight of it for example, might
gradually purchase or command a smaller and a smaller quantity of
labour, or exchange for a smaller and a smaller quantity of corn,
the principal part of the subsistence of the labourer.

The great market for silver is the commercial and civilized part
of the world.

If by the general progress of improvement the demand of this
market should increase, while at the same time the supply did not
increase in the same proportion, the value of silver would gradually
jise in proportion to that of corn. Any given quantity of silver

CHAP. xi. THE WEALTH OF NATIONS. 187

would exchange for a greater and a greater quantity of corn ; or, in
other words, the average money price of corn would gradually
become cheaper and cheaper.

If, on the contrary, the supply by some accident should increase
for many years together in a greater proportion than the demand, that
metal would gradually become cheaper and cheaper ; or in other
words, the average money price of corn would, in spite of all im-
provements, gradually become dearer and dearer.

But if, on the other hand, the supply of the metal should in-
crease nearly in the same proportion as the demand, it would con-
tinue to purchase or exchange for nearly the same quantity of corn,
and the average money price of corn would, in spite of all improve-
ments, continue very nearly the same.

These three seem to exhaust all the possible combinations of
events which can happen in the progress of improvement ; and
during the course of the four centuries preceding the present, if we
may judge by what has happened both in France and Great Britain,
each of those three different combinations seem to have taken place
in the European market, and nearly in the same order too in which
I have here set them down.

Digression concerning the Variations in the Talue of Silver during tlie
Course of Ike Four last Centuries.

FIRST PERIOD.

In 1350* and for some time before, the average price of the
quarter of wheat in England seems not to have been estimated
lower than four ounces of silver, Tower- weight, equal to about
twenty shillings of our present money. 1 From this price it seems
to have fallen gradually to two ounces of silver, equal to about ten
shillings of our present money, the price at which we find it
estimated in the beginning of the sixteenth ceutury, and at which
it seems to have continued to be estimated till about 1570.

In 1350, being the 25th of Edward III, was enacted what is
called the Statute of Labourers. In the preamble it complains much

1 The average price of wheat between It is probable that up to the period re*
1261-1350 was 5*. 9jd. f equal in weight ferred to by Smith, money was paid by
to about 1 7. 3d. of our present money. weight.

188 THE NATURE AND CAUSES OF BOOK i.

of the insolence of servants, who endeavoured to raise their wa<*es

* ~

upon their masters. It therefore ordains that all servants and
labourers should for the future be contented with the same wa<?es

O

and liveries (liveries in those times signified not only clothes, but
provisions) which they had been accustomed to receive in the aoth
year of the king and the four preceding years; that upon this
account their livery wheat should nowhere be estimated higher
than tenpence a bushel, and that it should always be in the option
of the master to deliver them either the wheat or the money. Ten-
pence a bushel, therefore, had in the 25th of Edward III been
reckoned a very moderate price of wheat, since it required a
particular statute to oblige servants to accept of it in exchange
for their usual livery of provisions ; and it had been reckoned
a reasonable price ten years before that, or in the i6th year of
the king, the term to which the statute refers. But in the 1 6th
year of Edward III, tenpence contained about half an ounce of
silver, Tower-weight, and was nearly equal to half a crown of
our present money. Four ounces of silver, Tower-weight, there-
fore, equal to six shillings and eightpenco of the money of those
times, and to near twenty shillings of that of the present, must have
been reckoned a moderate price for the quarter of eight bushels.

This statute is surely a better evidence of what was reckoned
in those times a moderate price of grain, than the prices of some
particular years which have generally been recorded by historians
and other writers on account of their extraordinary dearness or
cheapness, and from which, therefore, it is difficult to form any
judgment concerning what may have been the ordinary price.
There are, besides, other reasons for believing that in the begin-
ning of the fourteenth century, and for some time before, the
common price of wheat was not less than four ounces of silver
the quarter, and that of other grain in proportion.

In 1309, Ralph de Born, 1 Prior of St. Augustine's, Canterbury,
gave a feast upon his installation-day, of which William Thorn has
preserved, -not only the bill of fare, but the prices of many par-
ticulars. In that feast were consumed, ist, fifty-three quarters of
wheat, which cost nineteen pounds, or seven shillings and twopence
a quarter, equal to about one-and-twenty shillings and sixpence of
out present money ; sndly, fifty-eight quarters of malt, which cost
1 This account is taken from Fleetwood's Chronicon Pretiosum.

CHAP. xi. THE WEALTH OF NATIONS. 189

seventeen pounds ten shillings, or six shillings a quarter, equal to
about eighteen shillings of our present money; 3rdly, twenty
quarters of oats, which cost four pounds, or four shillings a quarter,
equal to about twelve shillings of our present money. The prices
of malt and oats seem here to be higher than their ordinary pro->
portion to the price of wheat. 1

These prices are not recorded on account of their extraordinary
dearness or cheapness, but are mentioned accidentally as the prices
actually paid for large quantities of grain consumed at a feast which
was famous for its magnificence.

In 1262, being the 5ist of Henry III, was revived an ancient
statute called < The Assize of Bread and Ale/ which, the king says
in the preamble, had been made in the times of his progenitors
sometime kings of England. It is probably, therefore, as old at
least as the time of his grandfather Henry II, and may have been
as old as the Conquest. It regulates the price of bread according as
the prices of wheat may happen to be, from one shilling to twenty
shillings the quarter of the money of those times. But statutes of
this kind are generally presumed to provide with equal care for all
deviations from the middle price, for those below it as well as for
those above it. Ten shillings, therefore, containing six ounces of
silver, Tower-weight, and equal to about thirty shillings of our
present money, must, upon this supposition, have been reckoned the
middle price of the quarter of wheat when this statute was first
enacted, and must have continued to be so in the 5ist of Henry III.
We cannot therefore be very wrong in supposing that the middle
price was not less than one-third of the highest price at which this
statute regulates the price of bread, or than six shillings and eight-
pence of the money of those times, containing four ounces o.f silver,
Tower-Weight.

From these different facts, therefore, we seem to have some
reason to conclude, that about the middle of the fourteenth century,
and for a considerable time before, the average or ordinary price of
the quarter of wheat was not supposed to be less than four ounces of
silver, Tower-weight.

From about the middle of the fourteenth to the beginning of

1 The year 1309 was a very clear year, barley, 58. 2r7. ; oats, 3*. 3$. ; beans,
prices having been higher than for fifty 7$. <\d. ; peas, 5* 2\d. ; vetches, 5*. 4^. ;
years before, except in 1294-5. The aver- rye, 5*. 8(/. ; best malt, 6s. id. Agri-
age prices of grain were : -Wheat, 7*. 9f d. ; culture and Prices, vol. i.

190 THE NATURE AND CAUSES OF BOOK i.

the sixteenth century, what was reckoned the reasonable and mode-
rate, that is the ordinary or average price of wheat, seems to have
sunk gradually to about one-half of this price ; so as at last to have
fallen to about two ounces of silver, Tower-weight, equal to about
ten shillings of our present money. It continued to be estimated
at this price till about 1570.

In the household book of Henry, the fifth Earl of Northumber-
land, drawn up in 1512, there are two different estimations of
wheat. In one of them it is computed at six shillings and eight-
pence the quarter, in the other at five shillings and eightpence
only. In 1512, six shillings and eightpence contained only two
ounces of silver, Tower-weight, and were equal to about ten shillings
of our present money.

From the 25th of Edward III to the beginning of the reign of
Elizabeth, during the space of more than two hundred years, six
shillings and eightpence, it appears from several different statutes,
had continued to be considered as what is called the moderate and
reasonable, that is the ordinary or average price of wheat. The
quantity of silver, however, contained in that nominal sum was,
during the course of this period, continually diminishing, in con-
sequence of some alterations which were made in the coin. But
the increase of the value of silver had, it seems, so far compensated
the diminution of the quantity of it contained in the same nominal
sum, that the legislature did not think it worth while to attend to
this circumstance.

Thus in 1436 it was enacted, that wheat might be exported with-
out a licence when the price was so low as six shillings and eight-
pence : and in 1463 it was enacted, that no wheat should be imported
if the price was not above six shillings and eightpence the quarter.
The legislature had imagined, that when the price was so low, there
could be no inconveniency in exportation, but that when it rose
higher, it became prudent to allow of importation. Six shillings
and eightpence, therefore, containing about the same quantity of
silver as thirteen shillings and fourpence of our present money (one
third part less than the same nominal sum contained in the time of
Edward III), had in those times been considered as what is called
the moderate and reasonable price of wheat.

In 1 554> hy the 1st and and of Philip and Mary; and in 1558,
by the ist of Elizabeth, the exportation of wheat was in the same

CHAP. xi. THE WEALTH OF NATIONS. 191

manner prohibited, whenever the price of the quarter should exceed
six shillings and eightpence, which did not then contain two penny-
worth more silver than the same nominal sum does at present.
But it had soon been found that to restrain the exportation of
wheat till the price was so very low, was, in reality, to prohibit it
altogether. In 1562, therefore, by the 5th of Elizabeth, the ex-
portation of wheat was allowed from certain ports whenever the
price of the quarter should not exceed ten shillings, containing
nearly the same quantity of silver as the like nominal sum docs at
present. This price had at this time, therefore, been considered as
what is called the moderate and reasonable price of wheat. It
agrees nearly with the estimation of the Northumberland book
in 1512.

That in Franco the average price of grain was, in the same
manner, much lower in the end of the fifteenth and beginning of
the sixteenth century, than in the two centuries preceding, has
been observed both by M. Dupre de St. Maur, 1 and by the elegant
author of the essay on the Police of Grain. Its price, during the
same period, had probably sunk in the same manner through the
greater part of Europe.

This rise in the value of silver in proportion to that of corn, may
cither have been owing altogether to the increase of the demand for
that metal, in consequence of increasing improvement and cultiva-
tion, the supply in the meantime continuing the same as before : or,
the demand continuing the same as before, it may have been owing
altogether to the gradual diminution of the supply; the greater
part of the mines which were then known in the world being much
exhausted, and consequently the expense of working them much
increased : or it may have been owing partly to the one and partly
to the other of those two circumstances. In the end of the fifteenth
and beginning of the sixteenth centuries, the greater part of Europe
was approaching towards a more settled form of government than
it had enjoyed for several ages before. The increase of security
would naturally increase industry and improvement ; and the de-
mand for the precious metals, as well as for every other luxury and
ornament, would naturally increase with the increase of riches. A
greater annual produce would require a greater quantity of coin to
circulate it; and a greater number of rich people would require

1 Recherches sur le Valeur des Monnoies, efc sur la Prix des Grains. Paris, 1762.

192 THE NATURE AND CAUSES OF BOOK i.

a greater quantity of plate and other ornaments of silver. It is
natural to suppose too, that the greater part of the mines which
then supplied the European market with silver, might be a good
deal exhausted, and have become more expensive in the working.
They had been wrought, many of them, from the time of the
Romans.

It has been the opinion, however, of the greater part of those
who have written upon the prices of commodities in ancient times,
that from the Conquest, perhaps from the invasion of Julius Caesar
till the discovery of the mines of America, the value of silver was
continually diminishing. This opinion they seem to have been led
into, partly by the observations which they had occasion to make
upon the prices both of corn and of some other parts of the rude pro-
duce of land ; and partly by the popular notion, that as the quantity
of silver naturally increases in every country with the increase of
wealth, so its value diminishes as its quantity increases.

In their observations upon the prices of corn, three different
circumstances seem frequently to have misled them.

First, in ancient times almost all rents were paid in kind ; in
a certain quantity of corn, cattle, poultry, &c. It sometimes hap-
pened, however, that the landlord would stipulate, that he should
be at liberty to demand of the tenant, either the annual payment
in kind, or a certain sum of money instead of it. The price at
which the payment in kind was in this manner exchanged for a
certain sum of money, is in Scotland called the conversion price.
As the option is always in the landlord to take either the substance
or the price, it is necessary for the safety of the tenant, that the
conversion price should rather be below than above the average
market price. In many places, accordingly, it is not much above
one-half of this price. Through the greater part of Scotland this
custom still continues with regard to poultry, and in some places
with regard to cattle. It might probably have continued to take
place too with regard to corn, had not the institution of the public
fiars put an end to it. These are annual valuations, according to
the judgment of an assize, of the average price of all the different
sorts of grain, and of all the different qualities of each, according to
the actual market price in every different county. This institution
rendered it sufficiently safe for the tenant, and much more con-
venient for the landlord, to convert, as they call it, the corn rent,

CHAP. xi. THE WEALTH OF NATIONS. 193

rather at what should happen to be the price of the fiars of each
year, than at any certain fixed price. But the writers who have
collected the prices of corn in ancient times, seem frequently to
have mistaken what is called in Scotland the conversion price for
the actual market price. Fleetwood acknowledges, upon one occa-
sion, that he had made this mistake. As he wrote his book, how-
ever, for a particular purpose, he does not think proper to make
this acknowledgment till after transcribing this conversion price
fifteen times. The price is eight shillings the quarter of wheat.
This sum in 1423, the year at which he begins with it, contained
the same quantity of silver as sixteen shillings of our present money.
But in 1562? the year at which he ends with it, it contained no
more than the same nominal sum does at present.

Secondly, they have been misled by the slovenly manner in which
some ancient statutes of assize had been sometimes transcribed by
lazy copiers ; and sometimes perhaps actually composed by the
legislature.

The ancient statutes of assize seem to have begun always with
determining what ought to be the price of bread and ale when the
price of wheat and barley were at the lowest, and to have pro-
ceeded gradually to determine what it ought to be according as
the prices of those two sorts of grain should gradually rise above
this lowest price. But the transcribers of those statutes seem
frequently to have thought it sufficient to copy the regulation as
far as the three or four first and lowest prices ; saving in this
manner their own labour, and judging, I suppose, that this was
enough to show what proportion ought to be observed in all higher
prices.

Thus in the Assize of Bread and Ale of the 5ist of Henry III
the price of bread was regulated according to the different prices
of wheat, from one shilling to twenty shillings the quarter, of the
money of those times. But in the manuscripts from which all
the different editions of the statutes, preceding that of Mr. Ruff-
head, were printed, the copiers had never transcribed this regulation
beyond the price of twelve shillings. Several writers, therefore,
being misled by this faulty transcription, very naturally concluded
that the middle price, or six shillings the quarter, equal to about
eighteen shillings of our present money, was the ordinary or average
price of wheat at that time.

VOL. i. o

194 THE NATURE AND CAUSES OF BOOK i.

In tlie statute of Tumbrel and Pillory, enacted nearly about the
same time, the price of ale is regulated according to every sixpence
rise in the price of barley, from two shillings to four shillings the
quarter. That four shillings, however, was not considered as the
highest price to which barley might frequently rise in those times,
and that these prices were only given as an example of the propor-
tion which ought to be observed in all other prices, whether higher
or lower, we may infer from the last words of the statute, ' Et sic
deinceps crescetur vel diminuctur per sex denarios.' The expression
is very slovenly, but the meaning is plain enough ; ' That the price
of ale is in this manner to be increased or diminished according to
every sixpence rise or fall in the price of barley/ In the composi-
tion of this statute the legislature itself seems to have been as
negligent as the copiers were in the transcription of the other.

In an ancient manuscript of the Regiam Majestatem, an old
Scotch law book, there is a statute of assize, in which the price of
bread is regulated according to all the different prices of wheat,
from tenpence to three shillings the Scotch boll, equal to about
half an English quarter. Three shillings Scotch, at the time when
this assize is supposed to have been enacted, were equal to about nine
shillings sterling of our present money. Mr. Iluddiman seems * to
conclude from this that three shillings was the highest price to
which wheat ever rose in those times, and that tenpence, a shilling,
or at most two shillings, were the ordinary prices. Upon consulting
the manuscript, however, it appears evidently that all these prices
are only set down as examples of the proportion which ought to be
observed between the respective prices of wheat and bread. The
last words of the statute are, { reliqua judicabis secundum pra?scripta
habendo respectum ad pretium bladi.' 'You shall judge of the re-
maining cases according to what is above written having a respect
to the price of corn.'

Thirdly, They seem to have been misled too by the very low
price at which wheat was sometimes sold in very ancient times;
and to have imagined, that as its lowest price was then much lower
than in later times, its ordinary price must likewise have been much
lower. They might have found, however, that in those ancient
times its highest price was fully as much above as its lowest price
was below anything that had ever been known in later times. Thus
* See his preface to Anderson's Diplomats Scotue.

CHAP. xi. THE WEALTH OF NATIONS. 195

in 1270, Flcctwood gives us two prices of the quarter of wheat. 1
The one is four pounds sixteen shillings of the money of those times,
equal to fourteen pounds eight shillings of that of the present ; the
other is six pounds eight shillings, equal to nineteen pounds four
shillings of our present money. No price can be found in the end
of the fifteenth, or beginning of the sixteenth century, which ap-
proaches to the extravagance of these. The price of corn, though
at all times liable to variations, varies most in those turbulent and
disorderly societies, in which the interruption of all commerce and
communication hinders the plenty of one part of the country from
relieving the scarcity of another. In the disorderly state of England
under the Plantagenets, who governed it from about the middle of
the twelfth till towards the end of the fifteenth century, one district
might be in plenty, while another at no great distance, by having
its crop destroyed either by some accident of the seasons, or by the
incursion of some neighbouring baron, might be suffering all the
horrors of a famine j and yet if the lands of some hostile lord were
interposed between them, the one might not be able to give the
least assistance to the other. 2 Under the vigorous administration
of the Tudors, who governed England during the latter part of the
fifteenth, and through the whole of the sixteenth century, no baron
was powerful enough to dare to disturb the public security.

The reader will find at the end of this chapter all the prices of
wheat which have been collected by Fleetwood from 1203 to 1597,
both inclusive, reduced to the money of the present times, and
digested according to the order of time, into seven divisions of
twelve years each. At the end of each division too, he will find
the average price of the twelve years of which it consists. In that
long period of time, Fleetwood has been able to collect the prices of
no more than eighty years, so that four years are wanting to make
out the last twelve years. I have added, therefore, from the accounts

1 These prices are impossible. But was the fact. Communications were easy,
they are also erroneous. 1270 Wcis a roads were good (the evidence of the
comparatively dear year, the average of latter fact being the low rates at which
ten localities giving 6*. 4-^?. as the price. goods were carried and the comparative
The highest price which I have found is quickness of transport), and the king' 9
at Lopluun in Norfolk, where wheat was peace was observed. Common carriers
sold in July at 9*. traversed the roads from north to south,

2 It is a natural but a capital error on and complaints of violence are rare. For
the part of Adani Smith, that he believed this general peaceableness, England was
the country to have been in a turbulent perhaps much indebted to the police
and disorderly state during the days of system which prevailed under manorial
the Plantagenets. The reverse however self-government.

196 THE NATURE AND CA USES OF BOOK i.

of Eton College, the prices of 1598, 1599, 1600, and 1601. It is
the only addition which I have made. The reader will see that
from the beginning of the thirteenth, till after the middle of the
sixteenth century, the average price of each twelve years grows
gradually lower and lower ; and that towards the end of the six-
teenth century it begins to rise again. The prices, indeed, which
Fleetwood has been able to collect seem to have been those chiefly
which were remarkable for extraordinary dearness or cheapness ;
and I do not pretend that any very certain conclusion can be drawn
from them. / So far, however, as they prove anything at all, they
confirm the account which I have been endeavouring to give.
Fleetwood himself, however, seems, with most other writers, to
have believed, that during all this period the value of silver, in
consequence of its increasing abundance, was continually dimi-
nishing. The prices of corn which he himself has collected cer-
tainly do not agree with this opinion. They agree perfectly with
that of M. Dupre de St. Maur, and with that which I have been
endeavouring to explain. Bishop Fleetwood and M. Dupre dc
St. Maur are the two authors who seem to have collected, with the
greatest diligence and fidelity, the prices of things in ancient times.
It is somewhat curious that, though their opinions are so very
different, their facts, so far as they relate to the price of corn at
least, should coincide so very exactly. 1

It is not, however, so much from the low price of corn, as from
that of some other parts of the rude produce of land, that the most
judicious writers have inferred the great value of silver in those very
ancient times. Corn, it has been said, being a sort of manufacture,
was, in those rude ages, much dearer in proportion than the greater
part of other commodities ; it is meant, I suppose, than the greater
part of unmanufactured commodities ; such as cattle, poultry, game
of all kinds, &c. That in those times of poverty and barbarism
these were proportionally much cheaper than corn, is undoubtedly
true. But this cheapness was not the effect of the high value of
silver, but of the low value of those commodities. It was not
because silver would in such times purchase or represent a greater
quantity of labour, but because such commodities would purchase

1 The reader will find the prices of at the foot of this chapter, and the same
corn, extracted from the Editcr'a work prices calculated by decades of years.
on Prices, from the years 1259 to 1582,

CHAP. xi. THE WEALTH OF NATIONS. 197

or represent a much smaller quantity than in times of more opulence
and improvement. Silver must certainly be cheaper in Spanish
America than in Europe ; in the country where it is produced, than
in the country to which it is brought, at the expense of a long
carriage both by land and by sea, of a freight and an insurance.
One-and- twenty pence halfpenny sterling, however, we are told by
Ulloa, was, not many years ago, at Buenos Ayres, the price of an
ox chosen from a herd of three or four hundred. Sixteen shillings
sterling, we are told by Mr. Byron, 1 was the price of a good horse
in the capital of Chili. In a country naturally fertile, but of which
the far greater part is altogether uncultivated, cattle, poultry, game
of all kinds, &c., as they can be acquired with a very small quantity
of labour, so they will purchase or command but a very small
quantity. The low money price for which they may be sold is no
proof that the real value of silver is there very high, but that the
real value of those commodities is very low.

Labour, it must always be remembered, and not any particular
commodity or set of commodities, is the real measure of the value
both of silver and of all other commodities.

But in countries almost waste, or but thinly inhabited, cattle,
poultry, game of all kinds, &c., as they arc the spontaneous pro-
ductions of nature, so she frequently produces them in much greater
quantities than the consumption of the inhabitants requires. In
such a state of things the supply commonly exceeds the demand.
In different states of society, in different stages of improvement,
therefore, such commodities will represent, or be equivalent to, very
different quantities of labour.

In every state of society, in every stage of improvement, corn is
the production of human industry. But the average produce of
every sort of industry is always suited, more or less exactly, to the
average consumption ; the average supply to the average demand.
In every different stage of improvement, besides, the raising of
equal quantities of corn in the same soil ana climate will, at aft
average, require nearly equal quantities of labour ; or what comes
to the same thing, the price of nearly equal quantities; the con-
tinual increase of the productive powers of labour in an improving
state of cultivation being more or less counterbalanced by the

1 Narrative of the great Distresses suffered on the Coast of Patagonia from 1 740 to
1746 (London, 1768), p. 220.

198 THE NATURE AND CAUSES OF BOOK i.

continually increasing price of cattle, the principal instruments of
agriculture. 1 Upon all these accounts, therefore, we may rest
assured, that equal quantities of corn will, in every state of society,
in every stage of improvement, more nearly represent, or be equi-
valent to, equal quantities of labour, than equal quantities of any
other part of the rude produce of land. Corn, accordingly, it has
already been observed, is, in all the different stages of wealth and
improvement, a more accurate measure of value than any other
commodity or set of commodities. In all those different stages,
therefore, we can judge better of the real value of silver, by com-
paring it with corn, than by comparing it with any other com-
modity, or set of commodities.

Corn, besides, or whatever else is the common and favourite
vegetable food of the people, constitutes, in every civilised country,
the principal part of the subsistence of the labourer. In conse-
quence of the extension of agriculture, the land of every country
produces a much greater quantity of vegetable than of animal food,
and the labourer everywhere lives chiefly upon the wholesome food
that is cheapest and most abundant. Butcher's-meat, except in the
most thriving countries, or where labour is most highly rewarded,
makes but an insignificant part of his subsistence : poultry makes a
still smaller part of it, and game no part of it. IP France, and
even in Scotland, where labour is somewhat better rewarded than in
France, the labouring poor seldom eat butcher's-meat, except upon
holidays and other extraordinary occasions. The money price of
labour, therefore, depends much more upon the average money price
of corn, the subsistence of the labourer, than upon that of butcher's-
meat, or of any other part of the rude produce of land. The real
value of gold and silver, therefore, the real quantity of labour which
they can purchase or command, depends much more upon the
quantity of corn which they can purchase or command, than upon

1 It is not true that in the same soil early period. The consequence has been

and climato equal quantities of corn will that population has greatly increased,

be obtained by equal quantities of labour. But on the other hand, for different

On the contrary, far greater quantities reasons, the correspondence between the

may be obt lined by far less labour, and price of food and the wages of labour at

will be, as agriculture improves. It is remote periods is alone owing to the laws

probable that the number of persons en- which govern the growth of population,

gaged in agriculture at present (1880) is For the relations between the price of

not more than were engaged five centuries food and labour in the Middle Ages, see

ago. It is certain that the produce of the Editor's Agriculture and Prices, vol. i.

food which such labour obtains is five chap. 29,
times as much as was obtained at that

CHAP. xi. THE WEALTH OF NATIONS. 199

that of butcher's-meat, or any other part of the rude produce of
land.

Such slight observations, however, upon the prices either of corn
or of other commodities, would not. probably have misled so many
intelligent authors, had they not been influenced, at the same time,
by the popular notion, that as the quantity of silver naturally in-
creases in every country with the increase of wealth, so its value
diminishes as its quantity increases. This notion, however, seems
to be altogether groundless.

The quantity of the precious metals may increase in any country
from two different causes : either, first, from the increased abundance
of the mines which supply it; or, secondly, from the increased
wealth of the people, from the increased produce of their annual
labour. The first of these causes is no doubt necessarily connected
with the diminution of the value of the precious metals ; but the
second is not.

When more abundant mines arc discovered, a greater quantity of
the precious metals is brought to market, and the quantity of the
necessaries and conveniences of life for which they must be ex-
changed being the same as before, equal quantities of the metals
must be exchanged for smaller quantities of commodities. So far,
therefore, as the increase of the quantity of the precious metals in
any country arises from the increased abundance of the mines, it is
necessarily connected with some diminution of their value.

When, on the contrary, the wealth of any country increases, when
the annual produce of its labour becomes gradually greater and
greater, a greater quantity of coin becomes necessary in order to
circulate a greater quantity of commodities ; and the people, as
they can afford it, as they have more commodities to give for it,
will naturally purchase a greater and a greater quantity of plate.
The quantity of their coin will increase from necessity ; tho quantity
of their plute from vanity and ostentation, or from the same reason
that the quantity of fine statues, pictures, and of every other luxury
and curiosity, is likely to increase among them. But as statuaries
and painters are not likely to be worse rewarded in times of wealth
and prosperity, than in times of poverty and depression, so gold and
silver are not likely to be worse paid for. 1

1 The price of gold and silver does not existence, but on the cost of production
depend on the quantity of each which is in and the demand for the production of each.

200 THE NATURE AND CAUSES OF BOOK i.

The price of gold and silver, when the accidental discovery of
more abundant mines does not keep it down, as it naturally rises
with the wealth of every country, so, whatever be the state of
the mines, it is at all times naturally higher in a rich than in
a poor country. Gold and silver, like all other commodities,
naturally seek the market where the best price is given for them,
and the best price is commonly given for everything in the country
which can best afford it. Labour, it must be remembered, is the
ultimate price which is paid for everything, and in countries where
labour is equally well rewarded, the money price of labour will
be in proportion to that of the subsistence of the labourer. But
gold and silver will naturally exchange for a greater quantity of
subsistence in a rich than in a poor country, in a country which
abounds with subsistence than in one which is but indifferently
supplied with it. If the two countries are at a great distance,
the difference may be very great; because though the metals
naturally fly from the worse to the better market, yet it may be
difficult to transport them in such quantities as to bring thoir
price nearly to a level in both. If the countries are near, the
difference will be smaller, and may sometimes be scarce perceptible ;
because in this case the transportation will be easy. China is a
much richer country than any part of Europe, and the difference
between the price of subsistence in China and in Europe is very
great. Rice in China is much cheaper than wheat is anywhere
in Europe. England is a much richer country than Scotland;
but the difference between the money price of corn in those two
countries is much smaller, and is but just perceptible. In pro-
portion to the quantity or measure, Scotch corn generally appears
to be a good deal cheaper than English ; but in proportion to
its quality, it is certainly somewhat dearer. Scotland receives
almost every year very large supplies from England, and every
commodity must commonly be somewhat dearer in the country
to which it is brought than in that from which it comes. English
corn, therefore, must be dearer in Scotland than in England, and

The amount of platinum in existence is far high. It should be added, that if a

less than the amount of the gold, but its country does not produce the precious

price is^ less because the demand for it is metals, but imports them by exchange,

less. Some of the metals which modern their price in the importing country will

chemistry has discovered are exceedingly be determined by the cost of that ae/ainst

rare, but their price is not thereupon which they are exchanged.

CHAP. xi. THE WEALTH OF NATIONS. 201

yet in proportion to its quality, or to the quantity and goodness
of the flour or meal which can be made from it, it cannot com-
monly be sold higher there than the Scotch corn which comes to
market in competition with it.

The difference between the money price of labour in China and
in Europe, is still greater than that between the money price of
subsistence; because the real recompense of labour is higher in
Europe than in China, the greater part of Europe being in an
improving state, while China seems to be standing still. The
money price of labour is lower in Scotland than in England
because the real recompense of labour is much lower; Scotland,
though advancing to greater wealth, advancing much more slowly
than England. The frequency of emigration from Scotland, and
the rarity of it from England, sufficiently prove that the demand
for labour is very different in the two countries. The proportion
between the real recompense of labour in different countries, it
must be remembered, is naturally regulated, not by their actual
wealth or poverty, but by their advancing, stationary, or declining
condition.

Gold and silver, as they are naturally of the greatest value among
the richest, so they are naturally of the least value among the
poorest nations. Among savages, the poorest of all nations, they
are of scarce any value.

In great towns corn is always dearer than in remote parts of
the country. This, however, is the effect, not of the real cheapness
of silver, but of the real dearness of corn. It does not cost less
labour to bring silver to the great towns than to the remote parts
of the country; but it costs a great deal more to bring corn. 1

In some very rich and commercial countries, such as Holland
and the territory of Genoa, corn is dearer for the same reason that
it is dear in great towns. They do not produce enough to main-
tain their inhabitants. They are rich in the industry and skill
of their artificers and manufacturers; in every sort of machinery
which can facilitate and abridge labour ; in shipping, and in all
the other instruments and means of carriage and commerce : but

1 This statement would be materially towns than in country places, since the

modified in the present day. Owing to market in the former is more regular,

the great cheapness, ease, and rapidity So the transit of similar commodities

of modern carriage, corn and many other which was difficult a century ago, is

commodities are actually cheaper in great very easy and obvious now.

202 THE NATURE AND CAUSES OF BOOK i.

they are poor in corn, which, as it must he brought to them
from distant countries, must, by an addition to its price, pay for
the carriage from those countries. It does not cost less labour
to bring 1 silver to Amsterdam than to Dantzic ; but it costs a
great deal more to bring corn. The real cost of silver must be
nearly the same in both places; but that of corn must be very
different. Diminish the real opulence either of Holland or of the
territory of Genoa, while the number of their inhabitants remains
the same ; diminish their power of supplying themselves from
distant countries ; and the price of corn, instead of sinking with
that diminution in the quantity of their silver which must neces-
sarily accompany this declension either as its cause or as its effect,
will rise to the price of a famine. When we are in want of
necessaries we must part with all superfluities, of which the value,
as it rises in times of opulence and prosperity, so it sinks in times
of poverty and distress. It is otherwise with necessaries. Their
real price, the quantity of labour which they can purchase or com-
mand, rises in times of poverty and distress, and sinks in times
of opulence and prosperity, which are always times of great abun-
dance ; for they could not otherwise be times of opulence and
prosperity. Corn is a necessary, silver is only a superfluity. 1

Whatever, therefore, may have been the increase in the quantity
of the precious metals, which, during the period between the middle
of the fourteenth and that of the sixteenth century, arose from
the increase of wealth and improvement, it could have no tendency
to diminish their value either in Great Britain or in any other
part of Europe. If those who have collected the prices of things
in ancient times, therefore, had, during this period, no reason to
infer the diminution of the value of silver, from any observations
which they had made upon the prices either of corn or of other
commodities, they had still less reason to infer it from any supposed
increase of wealth and improvement.

SECOND PEIUOD.

But how various soever may have been the opinions of the
learned concerning the progress of the value of silver during this
first period, they are unanimous concerning it during the second.

1 For a lengthened criticism on the whole of this passage, see llicardo's Political
Economy, chap. 28.

CHAP. xi. THE WEALTH OF NATIONS. 203

From about 1570 to about 1640, during a period of about
seventy years, the variation in the proportion between the value
of silver and that of corn held a quite opposite course. Silver
sunk in its real value, or would exchange for a smaller quantity
of labour than before ; and corn rose in its nominal price, and
instead of being commonly sold for about two ounces of silver
the quarler, or about ten shillings of our present money, came
to be sold for six and eight ounces of silver the quarter, or about
thirty and forty shillings of our present money.

The discovery of the abundant mines of America seems to have
been the sole cause of this diminution in the value of silver in
proportion to that of corn. It is accounted for accordingly in
the same manner by everybody; and there never has been any
dispute cither about the fact, or about the cause of it. The greater
part of Europe was, during this period, advancing in industry and
improvement, and the demand for silver must consequently have
been increasing. But the increase of the supply had, it seems,
so far exceeded that of the demand, that the value of that metal
sunk considerably. The discovery of the mines of America, it is to
be observed, does not seem to have had any very sensible effect
upon the prices of things in England till after 1570; though
even the mines of Potosi had been discovered more than twenty
years before. 1

From 1595 to 1620, both inclusive, the average price of the
quarter of nine bushels of the best wheat at Windsor market ap-
pears, from tho accounts of Eton College, to have been j6'2 is. 6^*7.
From which sum, neglecting the fraction, and deducting a ninth,
or 4*. 7*/7., the price of the quarter of eight bushels comes out
to have been i 16*. io^7. And from this sum, neglecting
likewise tho fraction, and deducting a ninth, or 4$. 1^7. for the
difference between the price of the best wheat and that of the
middle wheat, the price of the middle wheat conies out to have
been about ^i i2s. 8r7., or about six ounces and one-third of
an ounce of silver.

1 The abundance of the Peruvian mines same result. So rapid was the exhnus
may have greatly cheapened silver, but tioii of the native population under this
there can also be no doubt that the pro- forced labour, that Las Casas the mis-
cess by which this silver was procured, sionary, in order to save the relics of the
the compulsory service of the natives in Indian races, recommended, and in fact
the mines, contributed powerfully to the originated, the trade in negro slaves.

204 THE NATURE AND CAUSES OF BOOK i.

From 1621 to 1636, both inclusive, the average price of the same
measure of the best wheat at the same market appears, from the
same accounts, to have been 1 10$. ; from which making the
like deductions as in the foregoing case, the average price of the
quarter of eight bushels of middle wheat comes out to have been
^i 195. 6d. , or about seven ounces and two-thirds of an ounce
of silver.

THIRD PEIIIOD.

Between 1630 and 1640, or about 3636, the effect of the dis-
covery of the mines of America in reducing the value of silver
appears to have been completed, and the value of that metal seems
never to have sunk lower in proportion to that of corn than it
was about that time. It seems to have risen somewhat in the
course of the present century, and it had probably begun to do
so even some time before the end of the last.

From 1637 to 1700, both inclusive, being the sixty-four last
years of the last century, the average price of the quarter of nine
bushels of the best wheat at Windsor market appears, from the
Siime accounts, to have been 1 us. od. ; which is only is. o&L
dearer than it had been during the sixteen years before. But in
the course of these sixty- four years there happened two events
which must have produced a much greater scarcity of corn than
what the course of the seasons would otherwise have occasioned,
and which, therefore, without supposing any further reduction in
the value of silver, will much more than account for this very
small enhancement of price.

The first of these events was the Civil War, which, by dis-
couraging tillage and interrupting commerce, must have raised
the price of corn much above what the course of the seasons would
otherwise have occasioned. It must have had this effect more or
less at all the different markets in the kingdom, but particularly
at those in the neighbourhood of London, which require to be
supplied from the greatest distance. In 1648, accordingly, the
price of the best wheat at Windsor market appears, from the same
accounts, to have been ^4 5*., and in 1649 to have been .^4 the
quarter of nine bushels. The excess of those two years above
ios. (the average price of the sixteen years preceding 1637)

CHAP. xi. THE WEALTH OF NATIONS. 205

is ^3 5*- 5 which divided among the sixty-four last years of
the last century, will alone very nearly account for that small
enhancement of price which seems to have taken place in them.
These, however, though the highest, are hy no means the only
high prices which seem to have been occasioned by the Civil
Wars.

The second event was the bounty upon the exportation of corn
granted in 1688. The bounty, it has been thought by many
people, by encouraging tillage, may, in a long course of years, have
occasioned a greater abundance, and consequently a greater cheap-
ness of corn in the home market, than what would otherwise have
taken place there. How far the bounty could produce this effect at
any time I shall examine hereafter ; I shall only observe at present,
that between 1688 and 1700 it had not time to produce any such
effect. During this short period its only effect must have been, by
encouraging the exportation of the surplus produce of every year
and thereby hindering the abundance of one year from compen-
sating the scarcity of another, to raise the price in the home market.
The scarcity which prevailed in England from 1693 to 1699, both
inclusive, though no doubt principally owing to the badness of the
seasons, and therefore extending through a considerable part of
Europe, must have been somewhat enhanced by the bounty. In
1699, accordingly, the further exportation of corn was prohibited
for nine months.

There was a third event which occurred in the course of the same
period, and which, though it could not occasion any scarcity of corn,
nor, perhaps, any augmentation in the real quantity of silver which
was usually paid for it, must necessarily have occasioned some
augmentation in the nominal sum. This event was the great
debasement of the silver coin, by clipping and wearing. This evil
had begun in the reign of Charles II, and had gone on continually
increasing till 1695; at which time, as we may learn from Mr.
Lowndes, the current silver coin was, at an average, near five-and-
twenty per cent, below its standard value. But the nominal sum
which constitutes the market price of every commodity is necessa-
rily regulated, not so much by the quantity of silver which, accord-
ing to the standard, ought to be contained in it, as by that which
it is found by experience actually is contained in it. This nominal
sum, therefore, is necessarily higher when the coin is much de-

206 THE NATURE AND CAUSES OF BOOK i.

based by clipping and wearing, than when near to its standard
value.

In tho course of the present century, the silver coin has not at
any time been more below its standard weight than it is at present.
But though very much defaced, its value has been kept up by that
of the gold coin for which it is exchanged. For though before the
late re-coinage, the gold coin was a good deal defaced too, it was
less so than the silver. In 1695, on the contrary, the value of the
silver coin was not kept up by the gold coin ; a guinea then com-
monly exchanging for thirty shillings of the worn and clipped
silver. Before the late re-coinage of the gold, the price of silver
bullion was seldom higher than five shillings and sevcnpence an
ounce, which is but fivepence above the Mint price. But in 1695,
the common price of silver bullion was six shillings and fivepence
an ounce,*" which is fifteen-pence above the Mint price. Even
before the late re-coinage of the gold, therefore, the coin, gold and
silver together, when compared with silver bullion, was not sup-
posed to be more than eight per cent, below its standard value. In
1695, on the contrary, it had been supposed to be near five-and-
twenty per cent, below that value. But in the beginning of the
present century, that is, immediately after the great re-coinage in
King William's time, the greater part of the current silver coin
must have been still nearer to its standard weight than it is at
present. In the course of the present century, too, there has been
no great public calamity, such as the Civil War, which could cither
discourage tillage or interrupt the interior commerce of the country.
And though the bounty, which has taken place through the greater
part of this century, must always raise the price of corn somewhat
higher than it otherwise would be in the actual state of tillage ; yet
as, in the course of this century, the bounty has had full time to
produce all the good effects commonly imputed to it, to encourage
tillage, and thereby to increase the quantity of corn in the home
market, it may, upon the principles of a system which I shall
explain and examine hereafter, be supposed to have done something
to lower the price of that commodity the one way, as well as to
raise it the other. It is by many people supposed to have done
more. In the sixty-four first years of the present century accord-
ingly, the average price of the quarter of nine bushels of the best
* Lowndes's Eaaay on the Silver Coin, p. 68,

CHAP. xi. THE WEALTH OF NATIONS. 207

wheat at Windsor market appears, by the accounts of Eton College,
to have been % os. 6$*d., which is about ten shillings and six-
pence, or more than five-and-twenty per cent, cheaper than it had
been during the sixty- four last years of the last century ; and about
nine shillings and sixpence cheaper than it had been during the
sixteen years preceding 1636, \vhen the discovery of the abundant
mines of America may be supposed to have produced its full effect ;
and about one shilling cheaper than it had been in the twenty-six
years preceding 1620, before that discovery can well be supposed to
have produced its full effect. According to this account, the
average price of middle wheat, during these sixty-four first years
of the present century, comes out to have been about thirty-two
shillings the quarter of eight bushels.

The value of silver, therefore, seems to have risen somewhat in
proportion to that of corn during the course of the present century,
and it had probably begun to do so even some time before the end
of the last.

In 1687, the price of the quarter of nine bushels of the best
wheat at Windsor market was ,^i 5,9. z<L, the lowest price at
which it had ever been from 1595.

Tn 1688, Mr. Gregory King, a man famous for his knowledge in
matters of this kind, estimated the average price of wheat in years
of moderate plenty to be to the grower 3,9. 6d. the bushel, or eight-
ami-twenty shillings the quarter. The grower's price I understand
to bo the same with what is sometimes called the contract price, or
the price at which a farmer contracts for a certain number of years
to deliver a certain quantity of corn to a dealer. As a contract of
this kind saves the farmer the expense and trouble of marketing,
the contract price is generally lower than what is supposed to be
the average market price. Mr. King had judged eight-and-tweuty
shillings the quarter to be at that time the ordinary contract price
in years of moderate plenty. Before the scarcity occasioned by the
late extraordinary course of bad seasons. It was, I have been
assured, the ordinary contract price in all common years.

In 1688 was granted the Parliamentary bounty upon the exporta-
tion of corn. The country gentlemen, who then composed a still
greater proportion of the legislature than they do at present, had
felt that the money price of corn was falling. The bounty was an
expedient to raise it artificially to the high price at which it had

208 THE NATURE AND CAUSES OF BOOK i.

frequently been sold in the times of Charles I and II. It was to
take place, therefore, till wheat was so high as forty-eight sliil lings
the quarter ; that is twenty shillings, or f ths dearer than Mr. King
had in that very year estimated the grower's price to be in times of
moderate plenty. If his calculations deserve any part of the repu-
tation which they have obtained very universally, eight-and-forty
shillings the quarter was a price which, without some such expedient
as the bounty, could not at that time be expected, except in years of
extraordinary scarcity. But the government of King William was
not then fully settled. It was in no condition to refuse anything
to the country gentlemen, from whom it was at that very time
soliciting the first establishment of the annual land-tax.

The value of silver, therefore, in proportion to that of corn, had
probably risen somewhat before the end of the last century; and it
seems to have continued to do so during the course of the greater
part of the present ; though the necessary operation of the bounty
must have hindered that rise from being so sensible as it otherwise
would have been in the actual state of tillage.

In plentiful years the bounty, by occasioning an extraordinary
exportation, necessarily raises the price of corn above what it other-
wise would be in those years. To encourage tillage, by keeping up
the price of corn even in the most plentiful years, was the avowed
end of the institution.

In years of great scarcity, indeed, the bounty has generally been
suspended. It must, however, have had some effect even upon the
prices of many of those years. By the extraordinary exportation
which it occasions in years of plenty, it must frequently hinder the
plenty of one year from compensating the scarcity of another.

Both in years of plenty and in years of scarcity, therefore, the
bounty raises the price of corn above what it actually would be in
the actual state of tillage. If, during the sixty-four first years of
the present century, therefore, the average price has been lower than
during the sixty-four last years of the last century, it must, in the
same state of tillage, have been much more so had it not been for
this operation of the bounty.

But without the bounty, it may be said, the state of tillage
would not have been the same. What may have been the effects of
this institution upon the agriculture of the country I shall en-
deavour to explain hereafter, when I come to treat particularly

CHAP. xi. THE WEALTH OF NATIONS. 209

of bounties. I shall only observe, at present, that this rise in the
value of silver, in proportion to that of corn, has not been peculiar
to England. It has been observed to have taken place in France
during the same period, and nearly in the same proportion too, by
three very faithful, diligent, and laborious collectors of the prices of
corn, M. Dupre de St. Maur, M. Messance, and the author of the
essay on the Police of Grain. But in France, till 1764, the
exportation of grain was by law prohibited ; and it is somewhat
difficult to suppose, that nearly the same diminution of price which
took place in one country, notwithstanding this prohibition, should
in another be owing to the extraordinary encouragement given to
exportation.

It would be more proper, perhaps, to consider this variation in the
average money price of corn as the effect rather of some gradual rise
in the real value of silver in the European market, than of any fall
in the real average value of corn. Corn, it has already been observed,
is at distant periods of time a more accurate measure of value than
either silver or perhaps any other commodity. When, after the
discovery of the abundant mines in America, corn rose to three and
four times its former money price, this change was universally
ascribed, not to any rise in the real value of corn, but to a fall in
the real value of silver. If, during the sixty-four first years of the
present century, therefore, the average money price of corn has
fallen somewhat below what it had been during the greater part of
the last century, we should in the same manner impute this change,
not to any fall in the real value of corn, but to some rise in the
real value of silver in the European market.

The high price of corn during these ten or twelve years past,
indeed, has occasioned a suspicion that the real value of silver still
continues to fall in the European market. This high price of corn,
however, seems evidently to have been the effect of the extraordinary
unfavourableness of the seasons, and ought therefore to be regarded,
not as a permanent, but as a transitory and occasional event. The
seasons for these ten or twelve years past have been unfavourable
through the greater part of Europe ; and the disorders of Poland
have very much increased the scarcity in all those countries which,
in dear years, used to be supplied from that market. So long a
course of bad seasons, though not a very common event, is by no
means a singular one; and whoever has inquired much into the

VOL. I. *

210 THE NATURE AND CAUSES OF BOOK i.

history of the prices of corn in former times will be at no loss to
recollect several other examples of the same kind. Ten years of
extraordinary scarcity, besides, are not more wonderful than ten
years of extraordinary plenty. The low price of corn from 1741 to
1750, both inclusive, may very well be set in opposition to its high
price during these last eight or ten years. Prom 1741 to 1750, the
average price of the quarter of nine bushels of the best wheat at
Windsor market, it appears from the accounts of Eton College, was
only i 13$. 9^ r, which is nearly 6s. $d. below the average price
of the sixty-four first years of the present century. The average
price of the quarter of eight bushels of middle wheat comes out,
according to this account, to have been, during these ten years,
only j&i 6s. 8d.

Between 1741 and 1750, however, the bounty must have hindered
the price of corn from falling so low in the home market as it
naturally would have done. During these ten years the quantity
of all sorts of grain exported, it appears from the custom-house
books, amounted to no less than eight millions twenty-nine thou-
sand one hundred and fifty-six quarters, one bushel. The bounty
paid for this amounted to ^1,5 14,962 17$. ^\d. In 1749, ac-
cordingly, Mr. Pelham, at that time Prime Minister, observed to
the House of Commons, that for the three years preceding a very
extraordinary sum hqd been paid as bounty for the exportation
of corn. He had good reason to make this observation, and in
the following year he migl\t have had still better. In that single
year the bounty paid amounted to no less than ^324,176 los. 6d*
It is unnecessary to observe how much this forced exportation
must have raised the price of corn above what it otherwise would
have been in the home market.

At the end of the accounts annexed to this chapter the reader
will find the particular account of those ten years separated from
the rest. He will find there too the particular account of the
preceding ten years, of which the average is likewise below, though
not so much below, the general average of the sixty-four first
years of the century. The year 1740, however, was a year of
extraordinary scarcity. These twenty years preceding 1750 may
very well be set in opposition to the twenty preceding 1770. As
the former were a good deal below the general average of the

* S^e Tracts on the Corn Trade Tract 3,

CHAP. xi. THE WEALTH OF NATIONS. 211

century, notwithstanding the intervention of one or two dear
years; so the latter have been a good deal above it, notwith-
standing the intervention of one or two cheap ones, of 1759 for
example. If the former have not been as much below the general
average, as the latter have been above it, we ought probably to
impute it to the bounty. The change has evidently been too
sudden to be ascribed to any change in the value of silver, which
is always slow and gradual. The suddenness of the effect can
be accounted for only by a cause which can operate suddenly, the
accidental variation of the seasons.

The money price of labour in Great Britain has, indeed, risen
during the course of the present century. This, however, seems
to be the effect, not so much of any diminution in the value of
silver in the European market, as of an increase in the demand
for labour in Great Britain, arising from the great and almost
universal prosperity of the country. In France, a country not
altogether so prosperous, the money price of labour has, since the
middle of the last century, been observed to sink gradually with
the average money price of corn. Both in the last century and
in the present, the day-wages of common labour are there said
to have been pretty uniformly about the twentieth part of the
average price of the septier of wheat, a measure which contains
a little more than four Winchester bushels. In Great Britain
the real recompense of labour, it has already been shown, the
real quantities of the necessaries and conveniences of life which
are given to the labourer, has increased considerably during the
course of the present century. The rise in its money price seems
to have been the effect, not of any diminution of the value of
silver in the general market of Europe, but of a rise in the real
price of labour in the particular market of Great Britain, owing
to the peculiarly happy circumstances of the country.

For some time after the first discovery of America, silver would
continue to sell at its former, or not much beW its former price.
The profits of mining would for some time be very great, and
much above their natural rate. Those who imported that metal
into Europe, however, would soon find that the whole annual
importation could not be disposed of at this high price. Silver
would gradually exchange for a smaller and a smaller quantity
of goods. Its price would sink gradually lower and lower till it

p 2

212 THE NATURE AND CAUSES OF BOOK i.

fell to its natural price ; or to what was just sufficient to pay,
according to their natural rates, the wages of the labour, the
profits of the stock, and the rent of the land, which must be
paid in order to bring it from the mine to the market. In the
greater part of the silver mines of Peru, the tax of the king
of Spain, amounting to a tenth of the gross produce, eats up,
it has already been observed, the whole rent of the land. This
tax was originally a half; it soon afterwards fell to a third, then
to a fifth, and at last to a tenth, at which rate it still continues.
In the greater part of the silver mines of Peru, this, it seems,
is all that remains after replacing the stock of the undertaker
of the work, together with its ordinary profits ; and it seems to
be universally acknowledged that these profits, which were once
very high, are now as low as they can well be, consistently with
carrying on the works.

The tax of the king of Spain was reduced to a fifth part of
the registered silver in 1504,"* one-and-forty years before 1545,
the date of the discovery of the mines of Potosi. In the course
of ninety years, or before 1636, these mines, the most fertile in
all America, had time sufficient to produce their full effect, or
to reduce the value of silver in the European market as low as
it could well fall, while it continued to pay this tax to the king
of Spain. Ninety years is time sufficient to reduce any com-
modity, of which there is no monopoly, to its natural price, or
to the lowest price at which, while it pays a particular tax, it
can continue to be sold for any considerable time together.

The price of silver in the European market might perhaps have
fallen still lower, and it might have become necessary either to
reduce the tax upon it, not only to one-tenth, as in 1736, but
to one-twentieth, in the same manner as that upon gold, or to
give up working the greater part of the American mines which
are now wrought. The gradual increase of the demand for silver,
or the gradual enlargement of the market for the produce of the
silver mines of America, is probably the cause which has prevented
this from happening, and which has not only kept up the value of
silver in the European market, but has perhaps even raised it some-
what higher than it was about the middle of the last century.

Since the first discovery of America, the market for the produce

* Solorzano, vol. ii.

CHAP. xi. THE WEALTH OF NATIONS. 213

of its silver mines has been growing gradually more and more
extensive.

First, The market of Europe has become gradually more and
more extensive. Since the discovery of America, the greater part
of Europe has been much improved. England, Holland, France,
and Germany, even Sweden, Denmark, and Russia, have all
advanced considerably both in agriculture and in manufactures.
Italy seems not to have gone backwards. The fall of Italy pre-
ceded the conquest of Peru. Since that time it seems rather to
have recovered a little. Spain and Portugal, indeed, are supposed
to have gone backwards. Portugal, however, is but a very small
part of Europe, and the declension of Spain is not, perhaps, so
great as is commonly imagined. In the beginning of the six-
teenth century, Spain was a very poor country, even in comparison
with France, which has been so much improved since that time.
It was the well-known remark of the Emperor Charles V, who
had travelled so frequentl} 7 - through both countries, that everything
abounded in France, but that everything was wanting in Spain.
The increasing produce of the agriculture and manufactures of
Europe must necessarily have required a gradual increase in the
quantity of silver coin to circulate it; and the increasing number
of wealthy individuals must have required the like increase in the
quantity of their plate and other ornaments of silver.

Secondly, America is itself a now market for the produce of
its own silver mines ; and as its advances in agriculture, industry,
and population are much more rapid than those of the most
thriving countries in Europe, its demand must increase much
more rapidly. The English colonies are altogether a new market,
which, partly for coin and partly for plate, requires a continually
augmenting supply of silver through a great continent where there
never was any demand before. The greater part too of the Spanish
and Portuguese colonies are altogether new markets. New Grenada,
the Yucatan, Paraguay, and the Brazils were, before discovered
by the Europeans, inhabited by savage nations, who had neither
arts nor agriculture. A considerable degree of both has now been
introduced into all of them. Even Mexico and Peru, though they
cannot be considered as altogether new markets, are certainly
much more extensive ones than they ever were before. After all
the wonderful tales which have been published concerning the

214 THE NATURE AND CAUSES OF BOOK i.

splendid state of those countries in ancient times, whoever reads,
with any degree of sober judgment, the history of their first
discovery and conquest, will evidently discern that, in arts, agri-
culture, and commerce, their inhabitants were much more ignorant
than the Tartars of the Ukraine are at present. Even the Peruvians,
the more civilised nation of the two, though they made use of
gold and silver as ornaments, had no coined money of any kind.
Their whole commerce was carried on by barter, and there was
accordingly scarce any division of labour among them. Those
who cultivated the ground were obliged to build their own houses,
to make their own household furniture, their own clothes, shoes,
and instruments of agriculture. The few artificers among them
are said to have been all maintained by the sovereign, the nobles,
and the priests, and were probably their servants or slaves. All
the ancient arts of Mexico and Peru have never furnished one
single manufacture to Europe. The Spanish armies, though they
scarce ever exceeded five hundred men, and frequently did not
amount to half that number, found almost everywhere great diffi-
culty in procuring subsistence. The famines which they are said
to have occasioned almost wherever they went, in countries too
which at the same time are represented as very populous and
well-cultivated, sufficiently demonstrate that the story of this
populousness and high cultivation is in a great measure fabulous.
The Spanish colonies are under a government in many respects
less favourable to agriculture, improvement, and population, than
that of the English colonies. They seem, however, to be ad-
vancing in all these much more rapidly than any country in
Europe. In a fertile soil and happy climate, the great abundance
and cheapness of land, a circumstance common to all new colonies,
is, it seems, so great an advantage as to compensate many defects
in civil government. Frezier, 1 who visited Peru in 1713, repre-
sents Lima as containing between twenty-five and twenty-eight
thousand inhabitants. Ulloa, 2 who resided in the same country
between 1740 and 1746, represents it as containing more than
fifty thousand. The difference in their accounts of the populous-
ness of several other principal towns in Chili and Peru is nearly
the same ; and as there seems to be no reason to doubt of the

1 Voyage de la Mer du Sud, vol. ii. p. 379.

2 See below, Book IV. chap. vii.

CHAP. XT. THE WEALTH OF NATIONS. 215

good information of either, it marks an increase which is scarce
inferior to that of the English colonies. America, therefore, is
a new market for the produce of its own silver mines, of which
the demand must increase much more rapidly than that of the
most thriving country in Europe.

Thirdly, The East Indies is another market for the produce of the
silver mines of America, and a market which, from the time of the
first discovery of those mines, has been continually taking off a greater
and a greater quantity of silver. Since that time, the direct trade
between America and the East Indies, which is carried on by means
of the Acapulco ships, has been continually augmenting, and the
indirect intercourse by the way of Europe has been augmenting in
a still greater proportion. During the sixteenth century, the Por-
tuguese were the only European nation who carried on any regular
trade to the East Indies. In the last years of that century the
Dutch began to encroach upon this monopoly, and in a few years
expelled them from their principal settlements in India. During
the greater part of the last century those two nations divided the
most considerable part of the East India trade between them ; the
trade of the Dutch continually augmenting in a still greater propor-
tion than that of the Portuguese declined. The English and French
carried on some trade with India in the last century, but it has been
greatly augmented in the course of the present. The East India
trade of the Swedes and Danes began in the course of the present
century. Even the Muscovites now trade regularly with China by
a sort of caravans which go overland through Siberia and Tartary
to Pekin. The East India trade of all these nations, if we except
that of the French, which the last war had well nigh annihilated,
has been almost continually augmenting. The increasing consump-
tion of East India goods in Europe is, it seems, so great, as to afford
a gradual increase of employment to them all. Tea, for example,
was a drug very little used in Europe before the middle of the last
century. At present the value of the tea annually imported by the
English East India Company, for the use of their own countrymen,
amounts to more than a million and a half a year ; and even this is
not enough ; a great deal more being constantly smuggled into the
country from the ports of Holland, from Gottenburg in Sweden,
and from the coast of France too, as long as the French East India
Company was in prosperity. The consumption of the porcelain of

216 THE NATURE AND CAUSES OF BOOK i,

China, of the spiceries of the Moluccas, of the piece goods of Bengal,
and of innumerable other articles, has increased very nearly in a
like proportion. The tonnage accordingly of all the European ship-
ping employed in the East India trade, at any one time during the
last century, was not, perhaps, much greater than that of the English
East India Company before the late reduction of their shipping.

But in the East Indies, particularly in China and Hindostan, the
value of the precious metals, when the Europeans first began to
trade to those countries, was much higher than in Europe ; and it
still continued to be so. In rice countries, which generally yield
two, sometimes three crops in the year, each of them more plentiful
than any common crop of corn, the abundance of food must be much
greater than in any corn country of equal extent. Such countries
are accordingly much more populous. In them too the rich, having
a greater superabundance of food to dispose of beyond what they
themselves can consume, have the means of purchasing a much
greater quantity of the labour of other people. The retinue of a
grandee in China or Hindostan accordingly is, by all accounts, much
more numerous and splendid than that of the richest subjects in
Europe. The same superabundance of food, of which they have the
disposal, enables them to give a greater quantity of it for all
those singular and rare productions which nature furnishes but in
very small quantities ; such as the precious metals and the precious
stones, the great objects of the competition of the rich. Though the
mines, therefore, which supplied the Indian market had been as
abundant as those which supplied the European, such commodities
would naturally exchange for a greater quantity of food in India
than in Europe. But the mines which supplied the Indian market
with the precious metals seem to have been a good deal less abun-
dant, and those which supplied it with the precious stones a good
deal more so, than the mines which supplied the European. The
precious metals, therefore, would naturally exchange in India for
somewhat a greater quantity of the precious stones, and for a much
greater quantity of food, than in Europe. The money price of
diamonds, the greatest of all superfluities, would be somewhat lower,
and that of food, the first of all necessaries, a great deal lower in the
one country than in the other. But the real price of labour, the
real quantity of the necessaries of life which is given to the labourer,
it has already been observed, is lower both in China and Hindostan,

CHAP. xi. THE WEALTH OF NATIONS. 217

the two great markets of India, than it is through the greater part
of Europe. The wages of the labourer will there purchase a smaller
quantity of food ; and as the money price of food is much lower in
India than in Europe, the money price of labour is there lower
upon a double account ; upon account both of the small quantity
of food which it will purchase, and of the low price of that food.
But in countries of equal art and industry, the money price of the
greater part of manufactures will be in proportion to the money
price of labour; l and in manufacturing art and industry, China and
Hindostan, though inferior, seem not to be much inferior to any part
of Europe. The money price of the greater part of manufactures,
therefore, will naturally be much lower in those great empires than
it is anywhere in Europe. Through the greater part of Europe too
the expense of land-carriage increases very much both the real and
nominal price of most manufactures. It costs more labour, and
therefore more money, to bring first the materials, and afterwards
the complete manufacture to market. In China and Hindostan the
extent and variety of inland navigations save the greater part of this
labour, and consequently of this money, and thereby reduce still
lower both the real and the nominal price of the greater part of their
manufactures. Upon all these accounts, the precious metals are
a commodity which it always has been, and still continues to be,
extremely advantageous to carry from Europe to India. There is
scarce any commodity which brings a better price there ; or which,
in proportion to the quantity of labour and commodities which it
costs in Europe, will purchase or command a greater quantity of
labour and commodities in India. It is more advantageous too to
carry silver thither than gold ; because in China, and the greater
part of the other markets of India, the proportion between fine silver
and fine gold is but as ten, or at most as twelve, to one ; whereas in
Europe it is as fourteen or fifteen to one. In China, and the greater
part of the other markets of India, ten, or at most twelve, ounces of
silver will purchase an ounce of gold : in Europe it requires from
fourteen to fifteen ounces. In the cargoes, therefore, of the greater
part of European ships which sail to India, silver has generally been
one of the most valuable articles. It is the most valuable article in
the Acapulco ships which sail to Manilla. The silver of the new

1 This position will be true only when But high and low wages are not the
comparatively cheap and dear labour, as same as dear and cheap labour,
estimated in money, is of equal efficiency.

218 THE NATURE AND CAUSES OF BOOK i.

continent seems in this manner to be one of the principal commo-
dities by which the commerce between the two extremities of the old
one is carried on, and it is by means of it, in a great measure, that
those distant parts of the world are connected with one another.

In order to supply so very widely extended a market, the quantity
of silver annually brought from the mines must not only be sufficient
to support that continual increase both of coin and of plate which
is required in all thriving countries ; but to repair that continual
waste and consumption of silver which takes place in all countries
where that fnetal is used.

The continual consumption of the precious metals in coin by
wearing, and in plate both by wearing and cleaning, is very sensible ;
and in commodities of which the use is so very widely extended,
would alone require a very great annual supply. The consumption
of those metals in some particular manufactures, though it may not
perhaps be greater upon the whole than this gradual consumption,
is, however, much more sensible, as it is much more rapid. In the
manufactures of Birmingham alone, the quantity of gold and silver
annually employed in gilding and plating, and thereby disqualified
from ever afterwards appearing in the shape of those metals, is said
to amount to more than fifty thousand pounds sterling. We may
from thence form some notion how great must be the annual con-
sumption in all the different parts of the world, either in manufac-
tures of the same kind with those of Birmingham, or in laces,
embroideries, gold and silver stuffs, the gilding of books, furniture,
&c. A considerable quantity too must be annually lost in trans-
porting those metals from one place to another both by sea and by
land. In the greater part of the governments of Asia, besides, the
almost universal custom of concealing treasures in the bowels of the
earth, of which the knowledge frequently dies with the person who
makes the concealment, must occasion the loss of a still greater
quantity. 1

The quantity of gold and silver imported at both Cadiz and
Lisbon (including not only what comes under register, but what
may be supposed to be smuggled) amounts, according to the best
accounts, to about six millions sterling a year.

According to Mr. Meggens* the annual importation of the

1 For estimates as to the annual con- metals, see Chevalier on Gold, Cobden's
sumption of gold in the arts, and the translation, p. 88, &c.
annual wear and tear of the precious * Postscript to the Universal Merchant,

CHAP. xi. THE WEALTH OF NATIONS. 219

precious metals into Spain, at an average of six years, viz, from
1748 to 1753, both inclusive ; and into Portugal, at an average of
seven years, viz. from 1747 to 1753, both inclusive; amounted in
silver to 1,101,107 pounds weight; and in gold to 49,940 pounds
weight. The silver, at sixty-two shillings the pound Troy, amounts
to ^3,413,431 i os. sterling. The gold at forty-four guineas and
a-half the pound Troy, amounts to ^2,333,446 14$. sterling. Both
together amount to ^5,746,878 45. sterling. The account of what
was imported under register, he assures us, is exact. He gives us
the detail of the particular places from which the gold and silver
were brought, and of the particular quantity of each metal, which,
according to the register, each of them afforded. He makes an
allowance too for the quantity of each metal which he supposes may
have been smuggled. The great experience of this judicious mer-
chant renders his opinion of considerable weight.

According to the eloquent, and sometimes well-informed author
of the Philosophical and Political History of the Establishment of the
Europeans in the Two Indies, the annual importation of registered
gold and silver into Spain, at an average of eleven years, viz, from
1754 to 17^4? both inclusive, amounted to 13,984,185! piastres of
ten reals. On account of what may have been smuggled, however,
the whole annual importation, he supposes, may have amounted to
seventeen millions of piastres, which at 4*. 6d. the piastre, is equal
to ^3,825,000 sterling. He gives the details too of the particular
places from which the gold and silver were brought, and of the par-
ticular quantities of each metal which, according to the register,
each of them afforded. He informs us too, that if we were to judge
of the quantity of gold annually imported from the Brazils into
Lisbon by the amount of the tax paid to the King of Portugal, which
it seems is one-fifth of the standard metal, we might value it at
eighteen millions of cruzadoes, or forty-five millions of French livres,
equal to about two millions sterling. On account of what may
have been smuggled, however, we may safely, he says, add to this
sum an eighth more, or ^^OjOOO sterling, so that the whole will
amount to j6 2, 350,000 sterling. According to this account, there-
fore, the whole annual importation of the precious metals into both
Spain and Portugal amounts to about ^6,075,000 sterling.

p. 15 and 1 6. This Postscript was not had a second edition. The Postscript is,
printed till I75^> three years after the therefore, to be found in few copies. It
publication of the book, which has never corrects several errors in the book.

220 THE NATURE AND CAUSES OF BOOK r.

Several other very well authenticated, though manuscript, ac-
counts, I have heen assured, agree in making this whole annual
importation amount at an average to about six millions sterling ;
sometimes a little more, sometimes a little less.

The annual importation of the precious metals into Cadiz and
Lisbon, indeed, is not equal to the whole annual produce of the
mines of America. Some part is sent annually by the Aea-
pulco ships to Manilla ; some part is employed in the contraband
trade which the Spanish colonies carry on with those of other
European nations ; and some part, no doubt, remains in the country.
The mines of America, besides, are by no means the only gold and
silver mines in the world. They are, however, by far the most
abundant. The produce of all the other mines which are known, is
insignificant, it is acknowledged, in comparison with theirs; and
the far greater part of their produce, it is likewise acknowledged, is
annually imported into Cadiz and Lisbon. But the consumption of
Birmingham alone, at the rate of fifty thousand pounds a year, is
equal to the hundred-and-twentieth part of this annual importation
at the rate of six millions a year. The whole annual consumption
of gold and silver, therefore, in all the different countries of the
world where those metals are used, may perhaps be nearly equal to
the whole annual produce. The remainder may be no more than
sufficient to supply the increasing demand of all thriving countries.
It may even have fallen so far short of this demand as somewhat to
raise the price of those metals in the European market.

The quantity of brass and iron annually brought from the mine
to the market is out of all proportion greater than that of gold and
silver. We do not, however, upon this account imagine that those
coarse metals arc likely to multiply beyond the demand, or to
become gradually cheaper and cheaper. Why should we imagine
that the precious metals are likely to do so ? The coarse metals,
indeed, though harder, are put to much harder uses, and, as they
are of less value, less care is employed in their preservation. The
precious metals, however, are not necessarily immortal any more
than they, but are liable too to be lost, wasted, and consumed in a
great variety of ways.

The price of all metals, though liable to slow and gradual varia-
tions, varies less from year to year than that of almost any other
part of the rude produce of land ; and the price of the precious

CIUP. xi. THE WEALTH OF NATIONS. 221

metals is even less liable to sudden variations than that of the coarse
ones. The durableness of metals is the foundation of this extraor-
dinary steadiness of price. The corn which was brought to market
last year, will be all or almost all consumed long before the end of
this year. But some part of the iron which was brought from the
mine two or three hundred years ago may be still in use, and
perhaps some part of the gold which was brought from it two or
three thousand years ago. The different masses of corn which in
different years must supply the consumption of the world, will
always be nearly in proportion to the respective produce of those
different years. But the proportion between the different masses of
iron which may be in use in two different years will be very little
affected by any accidental difference in the produce of the iron
mines of those two years ; and the proportion between the masses
of gold will be still less affected by any such difference in the pro-
duce of the gold mines. Though the product of the greater part of
metallic mines, therefore, varies perhaps still more from year to
year than that of the greater part of corn-fields, those variations
have not the same effect upon the price of the one species of com-
modities as upon that of the other.

Variations in the Proportion between the respective Values of

Gold and Silver.

Before the discovery of the mines of America, the value of fine
gold to fine silver was regulated in the different mints of Europe,
between the proportions of one to ten and one to twelve ; that is,
an ounce of fine gold was supposed to be worth from ten to twelve
ounces of fine silver. About the middle of the last century it
came to be regulated, between the proportions of one to fourteen and
one to fifteen ; that is, an ounce of fine gold came to be supposed
worth between fourteen and fifteen ounces of fine silver. Gold rose
in its nominal value, or in the quantity of silver which was given
for it. Both metals sunk in their real value, or in the quantity of
labour which they could purchase ; but silver sunk more than gold.
Though both the gold and silver mines of America exceeded in
fertility all those which had ever been known before, the fertility
of the silver mines had, it seems, been proportionably still greater
than that of the gold ones.

222 THE NATURE AND CAUSES OF BOOK i.

The great quantities of silver carried annually from Europe to
India, have, in some of the English settlements, gradually reduced
the value of that metal in proportion to gold. In the mint of
Calcutta, an ounce of fine gold is supposed to be worth fifteen
ounces of fine silver, in the same manner as in Europe. It is in
the mint, perils, rated too high for the value which it bears in
the market of Bengal. In China, the proportion of gold to silver
still continues as one to ten, or one to twelve. In Japan, it is said
to be as one to eight.

The proportion between the quantities of gold and silver annually
imported into Europe, according to Mr. Meggens's account, is as
one to twenty-two nearly ; that is, for one ounce of gold there are
imported a little more than twenty-two ounces of silver. The great
quantity of silver sent annually to the East Indies, reduces, he
supposes, the quantities of those metals which remain in Europe to
the proportion of one to fourteen or fifteen, the proportion of their
values. The proportion between their values, he seems to think,
must necessarily be the same as that between their quantities, and
would therefore be as one to twenty-two, were it not for this
greater exportation of silver.

But the ordinary proportion between the respective values of two
commodities is not necessarily the same as that between the quan-
tities of them which are commonly in the market. The price of an
ox, reckoned at ten guineas, is about threescore times the price of a
lamb, reckoned at 35. 6d. It would be absurd, however, to infer from
thence, that there are commonly in the market threescore lambs for
one ox : and it would be just as absurd to infer, because an ounce
of gold will commonly purchase from fourteen to fifteen ounces of
silver, that there are commonly in the market only fourteen or
fifteen ounces of silver for one ounce of gold.

The quantity of silver commonly in the market, it is probable, is
much greater in proportion to that of gold, than the value of a
certain quantity of gold is to that of an equal quantity of silver.
The whole quantity of a cheap commodity brought to market, is
commonly not only greater, but of greater value, than the whole
quantity of a dear one. The whole quantity of bread annually
brought to market is not only greater, but of greater value, than
the whole quantity of butcher's-meat ; the whole quantity of
butcher's-meat, than the whole quantity of poultry; and the whole

CHAP, xi. THE WEALTH OF NATIONS. 223

quantity of poultry, than the whole quantity of wild fowl. There
are so many more purchasers for the cheap than for the dear com-
modity, that, not only a greater quantity of it, but a greater value,
can commonly be disposed of. The whole quantity, therefore, of
the cheap commodity must commonly be greater in proportion to
the whole quantity of the dear one, than the value of a certain
quantity of the dear one is to the value of an equal quantity of the
cheap one. When we compare the precious metals with one
another, silver is a cheap, and gold a dear commodity. We ought
naturally to expect, therefore, that there should always be in the
market, not only a greater quantity, but a greater value, of silver
than of gold. Let any man, who has a little of both, compare his
own silver with his gold plate, and he will probably find, that, not
only the quantity, but the value of the former greatly exceeds
that of the latter. Many people, besides, have a good deal of silver
who have no gold plate, which, even with those who have it, is
generally confined to watch-cases, snuff-boxes, and suchlike trinkets,
of which the whole amount is seldom of great value. In the British
coin, indeed, the value of the gold preponderates greatly, but it is
not so in that of all countries. In the coin of some countries the
value of the two metals is nearly equal. In the Scotch coin, before
the Union with England, the gold preponderated very little, though
it did somewhat,* as it appears by the accounts of the Mint. In
the coin of many countries the silver preponderates. In France,
the largest sums are commonly paid in that metal, and it is there
difficult to get more gold than what is necessary to carry about in
your pocket. The superior value, however, of the silver plate above
that of the gold, which takes place in all countries, will much
more than compensate the preponderance of the gold coin above
the silver, which takes place only in some countries.

Though, in one sense of the word, silver always has been, and
probably always will be, much cheaper than gold ; yet, in another
sense, gold may perhaps, in the present stite of the Spanish
market, be said to be somewhat cheaper than silver. A commodity
may be said to be dear or cheap, not only according to the absolute
greatness or smallness of its usual price, but according as that price
is more or less above the lowest for which it is possible to bring it
to market for any considerable time together. This lowest price is
* See Ruddhnan's Preface to Anderson's Diplomata, &c. Scotia?.

224 THE NATURE AND CAUSES OF BOOK r.

that which barely replaces, with a moderate profit, the stock which
must be employed in bringing the commodity thither. It is the
price which affords nothing to the landlord, of which rent makes
not any component part, but which resolves itself altogether into
wages and profit. But, in the present state of the Spanish market,
gold is certainly somewhat nearer to this lowest price than silver.
The tax of the King of Spain upon gold is only one-twentieth part
of the standard metal, or five per cent. ; whereas his tax upon silver
amounts to one-tenth part of it, or to ten per cent. In these
taxes too, it* has already been observed, consists the whole rent of
the greater part of the gold and silver mines of Spanish America ;
and that upon gold is still worse paid than that upon silver. The
profits of the undertakers of gold mines, too, as they more rarely
make a fortune, must, in general, be still more moderate than
those of the undertakers of silver mines. The price of Spanish
gold, therefore, as it affords both less rent and less profit, must,
in the Spanish market, be somewhat nearer to the lowest price
for which it is possible to bring it thither, than the price of
Spanish silver. When all expenses are computed, the whole
quantity of the one metal, it would seem, cannot, in the Spanish
market, be disposed of so advantageously as the whole quantity of
the other. The tax, indeed, of the King of Portugal upon the
gold of the Brazils, is the same with the ancient tax of the King
of Spain upon the silver of Mexico and Peru ; or one-fifth part of
the standard metal. It may, therefore, be uncertain whether to
the general market of Europe the whole mass of American gold
comes at a price nearer to the lowest for which it is possible to
bring it thither, than the whole mass of American silver.

The price of diamonds and other previous stones may, perhaps,
be still nearer to the lowest price at which it is possible to bring
them to market, than even the price of gold.

Though it is not very probable that any part of a tax, which
is not only imposed upon one of the most proper subjects of tax-
ation, a mere luxury and superfluity, but which affords so very
important a revenue, as the tax upon silver, will ever be given
up as long as it is possible to pay it ; yet the same impossibility
of paying it, which in 1736 made it necessary to reduce it from
one-fifth to one-tenth, may in time make it necessary to reduce
it still further; in the same manner as it made it necessary to

CHAP. xi. THE WEALTH OF NATIONS. 225

reduce the tax upon gold to one-twentieth. That the silver mines
of Spanish America, like all other mines, become gradually more
expensive in the working, on account of the greater depths at
which it is necessary to carry on the works, and of the greater
expense of drawing out the water and of supplying them with
fresh air at those depths, is acknowledged by everybody who has
inquired into the state of those mines. 1

These causes, which are equivalent to a growing scarcity of
silver (for a commodity may be said to grow scarcer when it
becomes more difficult and expensive to collect a certain quantity
of it), must, in time, produce one or other of the three following
events. The increase of the expense must either, first, be com-
pensated altogether by a proportionable increase in the price of
the metal; or, secondly, it must be compensated altogether by a
proportionable diminution of the tax upon silver ; or, thirdly, it
must be compensated partly by the one, and partly by the other
of those two expedients. This third event is very possible. As
gold rose in its price in proportion to silver, notwithstanding a
great diminution of the tax upon gold ; so silver might rise in
its price in proportion to labour and commodities, notwithstanding
an equal diminution of the tax upon silver.

Such successive reductions of the tax, however, though they
may not prevent altogether, must certainly retard, more or less,
the rise of the value of silver in the European market. In con-
sequence of such reductions, many mines may be wrought which
could not be wrought before, because they could not afford to
pay the old tax ; and the quantity of silver annually brought to
market must always be somewhat greater, and therefore the value
of any given quantity somewhat less, than it otherwise would
have been. In consequence of the reduction in 1736, the value
of silver in the European market, though it may not at this day
be lower than before that reduction, is probably at least ten per
cent, lower than it would have been had the Court of Spain
continued to exact the old tax.

1 Gold, says Sir Koderick Murchison, forth the downward persistence of the

Siluria (1854), P- 457* is generally found one and the superficial distribution of

superficially, silver in deep mines. * Mo- the other. " Surely there is a vein for

dern science, instead of contradicting, the silver .. the earth has dust of gold."

only confirms the truth of the aphorism Job, chap. 28.'
of the patriarch Job, which thus shadowed

VOL. I. O

226 THE NATURE AND CAUSES OF BOOK i.

That, notwithstanding this reduction, the value of silver has,
during the course of the present century, begun to rise somewhat
in the European market, the facts and arguments which have
been alleged above dispose me to believe, or more properly to
suspect and conjecture ; for the best opinion which I can form
upon this subject scarce, perhaps, deserves the name of belief.
The rise indeed, supposing there has been any, has hitherto been
so very small, that after all that has been said, it may perhaps
appear to many people uncertain, not only whether this event has
actually taken place, but whether the contrary may not have
taken place, or whether the value of silver may not still continue
to fall in the European market.

It must be observed, however, that whatever may be the sup-
posed annual importation of gold and silver, there must be a certain
period at which the annual consumption of those metals will be
equal to that annual importation. Their consumption must in-
crease as their mass increases, or rather in a much greater pro-
portion. As their mass increases, their value diminishes. They
are more used, and less cared for, and their consumption conse-
quently increases in & greater proportion than their mass. After
a certain period, therefore, the annual consumption of those metals
must, in this mariner, become equal to their annual importation,
provided that importation is not continually increasing; which,
in the present times, is not supposed to be the case.

If, when the annual consumption has become equal to the annual
importation, the annual importation should gradually diminish, the
annual consumption may, for some time, exceed the annual im-
portation. The mass of those metals may gradually and insensibly
diminish, and their value gradually and insensibly rise, till the
annual importation becoming again stationary, the annual con-
sumption will gradually and insensibly accommodate itself to what
that annual importation can maintain.

Grounds of the Suspicion that the Value of Silver still continues

to decrease.

The increase of the wealth of Europe, and the popular notion
that, as the quantity of the precious metals naturally increases
with the increase of wealth, so their value diminishes as their

CHAP. xi. THE WEALTH OF NATIONS. 227

quantity increases, may, perhaps, dispose many people to believe
that their value still continues to fall in the European market;
and the still gradually increasing 1 price of many parts of the rude
produce of land may confirm them still further in this opinion.

That that increase in the quantity of the precious metals, which
arises in any country from the increase of wealth, has no tendency
to diminish their value, I have endeavoured to show already.
Gold and silver naturally resort to a rich country, for the same
reason that all sorts of luxuries and curiosities resort to it; not
because they are cheaper there than in poorer countries, but because
they are dearer, or because a better price is given for them. 1 It
is the superiority of price which attracts them, and as soon as
that superiority ceases, they necessarily cease to go thither.

If you except corn and such other vegetables as are raised
altogether by human industry, that all other sorts of rude produce,
cattle, poultry, game of all kinds, the useful fossils and minerals
of the earth, &c. naturally grow dearer as the society advances
in wealth and improvement, I have endeavoured to show already.
Though such commodities, therefore, come to exchange for a greater
quantity of silver than before, it will not from thence follow that
silver has become really cheaper, or will purchase less labour than
before, but that such commodities have become really dearer, or
will purchase more labour than before. It is not their nominal
price only, but their real price which rises in the progress of
improvement. The rise of their nominal price is the effect, not
of any degradation of the value of silver, but of the rise in their
real price. 3

Different Effects of tJie Progress of Improvement upon three
different Sorts of rude Produce.

These different sorts of rude produce may be divided into three
classes. The first comprehends those which it is scarce in the
power of human industry to multiply at all. The second, those

1 Gold and silver are generally cheaper have made them dearer or cheaper, would
in rich than in poor countries (provided necessitate a note of greater length than
these metals are not produced in either), the text. For information on the sub-
because the rich country buys them at ject, the reader is referred to Tooke and
cheaper rates. Newmarch's History of Prices, Chevalier

2 Any attempt to comment on this on Gold, and Roswag's Les Mltaux Pre*-
dissertation of Adam Smith on the prices cieux.

of gold and silver, and the causes which

qa

228 THE NATURE AND CA USES OF BOOK r.

*

which it can multiply in proportion to the demand. The third,
those in which the efficacy of industry is either limited or un-
certain. In the progress of wealth and improvement, the real
price of the first may rise to any degree of extravagance, and
seems not to be limited by any certain boundary. That of the
second, though it may rise greatly, has, however, a certain boundary
beyond which it cannot well pass for any considerable time to-
gether. That of the third, though its natural tendency is to rise
in the progress of improvement, yet in the same degree of im-
provement it may sometimes happen even to fall, sometimes to
continue the same, and sometimes to rise more or less, according
as different accidents render the efforts of human industry, in
multiplying this sort of rude produce, more or less successful.

First Sort.

The first sort of rude produce of which the price rises in the
progress of improvement, is that which it is scarce in the power
of human industry to multiply at all. It consists in those things
which nature produces only in certain quantities, and which being
of a very perishable nature, it is impossible to accumulate together
the produce of many different seasons. Such are the greater part
of rare and singular birds and fishes, many different sorts of game,
almost all wild-fowl, all birds of passage in particular, as well as
many other things. When wealth and the luxury which accom-
panies it increase, the demand for these is likely to increase with
them, and no effort of human industry may be able to increase
the supply much beyond what it was before this increase of the
demand. The quantity of such commodities therefore remaining
the same, or nearly the same, while the competition to purchase
them is continually increasing, their price may rise to any degree
of extravagance, and seems not to be limited by any certain
boundary. If woodcocks should become so fashonable as to sell
for twenty guineas a-piece, no effort of human industry could
increase the number of those brought to market, much beyond
what it is at present. The high price paid by the Romans, in
the time of their greatest grandeur, for rare birds and fishes,
may in this manner easily be accounted for. These prices were
not the effects of the low value of silver in those times, but of
the high value of such rarities and curiosities as human industry

CHAP. xi. THE WEALTH OF NATIONS. 229

could not multiply at pleasure. The real value of silver was higher
at Rome, for somfc time before and after the fall of the republic,
than it is through the greater part of Europe at present. Three
sestertii, equal tp about sixpence sterling/ was the price which
the republic paid for the niodius or peck of the tithe-wheat of
Sicily. This price, however, was probably below the average
market price, the obligation to deliver their wheat at this rate
being considered as a tax upon the Sicilian farmers. When the
llomans, therefore, had occasion to order more corn than the tithe
of wheat amounted to, they were bound by capitulation to pay
for the surplus at the rate of four sestertii, or eightpence sterling,
the peck ; and this had probably been reckoned the moderate and
reasonable, that is, the ordinary or -average contract price of those
times ; it is equal to about one-and-twcnty shillings the quarter.
Eight-and-twenty shillings the quarter was, before the late years
of scarcity, the ordinary contract price of English wheat, which
in quality is inferior to the Sicilian, and generally sells for a lower
price in the European market. The value of silver, therefore, in
those ancient times, must have been to its value in the present,
as three to four inversely, that is, three ounces of silver would
then have purchased the same quantity of labour and commodities
which four ounces will do at present. When we read in Pliny,
therefore, that Seius* bought a white nightingale, as a present
for the Empress Agrippina, at the price of six thousand sestertii,
equal to about fifty pounds of our present money ; and that Asinius
Celer f purchased a surmullet at the price of eight thousand
sestertii, equal to about sixty-six pounds thirteen shillings and
four pence of our present money; the extravagance of those prices,
how much soever it may surprise us, is apt, notwithstanding, to
appear to us about one-third less than it really was. Their real
price, the quantity of labour and subsistence which was given
away for them, was about one-third more than their nominal price
is apt to express to us in the present times. Seius gave for the
nightingale the command of a quantity of labour and subsistence
equal to what .^66 13*. 4^. would purchase in the present times;
and Asinius Celer gave for the surmullet the command of a quantity

1 Before the time of Augustus three and Money. The modius contained one
sestertii were worth ?Wv after this time gallon 7*8576 pints.

Hussey's Essay on Ancient Weights * Lib. x. c. 29. t Lib. ix. c. 17.

230 THE NATURE AND CAUSES OF BOOK i.

equal to what 3@88 17*. 9^. would purchase. What occasioned
the extravagance of those high prices was, not so much the abun-
dance of silver, as the abundance of labour and subsistence of
* which those Romans had the disposal beyond what was necessary
for their own use. The quantity of silver of which they had
the disposal was a good deal less than what the command of the
same quantity of labour and subsistence would have procured to
them in the present times. 1

Second Sort.

The second sort of rude produce of which the price rises in
the progress of improvement, is that which human industry can
multiply in proportion to the demand. It consists in those useful
plants and animals which, in uncultivated countries, nature pro-
duces with such profuse abundance, that they are of little or no
value, and which, as cultivation advances, are therefore forced to
give place to some more profitable produce. During a long period
in the progress of improvement, the quantity of these is con-
tinually diminishing, while at the same time the demand for them
is continually increasing. Their real value, therefore, the real
quantity of labour which they will purchase or command, gradually
rises, till at last it gets so high as to render them as profitable
a produce as anything else which human industry can raise upon
the most fertile and best cultivated land. When it has got so high
it cannot well go higher. If it did, more land and more industry
would soon be employed to increase their quantity.

When the price of cattle, for example, rises so high that it is
as profitable to cultivate land in order to raise food for them, as in
order to raise food for man, it cannot well go higher. If it did,
more corn land would soon be turned into pasture. The extension
of tillage, by diminishing the quantity of wild pasture, diminishes
the quantity of butcher's- meat which the country naturally pro-
duces without labour or cultivation, and by increasing the number
of those who have either corn, or, what comes to the same thing,
the price of corn, to give in exchange for it, increases the demand.
The price of butcher's-meat, therefore, and consequently of cattle,

1 Similar illustrations are, rare wines, of books, coins and medals. Tho quantity
especially those of particular vintages, in existence may diminish, but cannot
pictures by the old masters, old editions be increased.

CHAP. XT. THE WEALTH OF NATIONS. 231

must gradually rise till it gets so high, that it becomes as profitable
to employ the most fertile and best cultivated lands in raising food
for them as in raising corn. But it must always be late in the
progress of improvement before tillage can be so far extended as to
raise the price of cattle to this height ; and till it has got to this
height, if the country is advancing at all, their price must be
continually rising. There arc, perhaps, some parts of Europe in
which the price of cattle has not yet got to this height. It had
not got to this height in any part of Scotland before the Union.
Had the Scotch cattle been always confined to the market of
Scotland, in a country of which the quantity of land, which can be
applied to no other purpose but the feeding of cattle, is so great in
proportion to what can be applied to other purposes, it is scarce
possible, perhaps, that their price could ever have risen so high as
to render it profitable to cultivate land for the sake of feeding them.
In England, the price of cattle, it has already been observed, seems,
in the neighbourhood of London, to have got to this height about
the beginning of the last century; but it was much later probably
before it got to it through the greater part of the remoter counties;
in some of which, perhaps, it may scarce yet have got to it. Of all
the different substances, however, which compose this second sort
of rude produce, cattle is, perhaps, that of which the price, in the
progress of improvement, first rises to this height.

Till the price of cattle, indeed, has got to this height, it seems
scarce possible that the greater part, even of those lands which arc
capable of the highest cultivation, can be completely cultivated.
In all farms too distant from any town to carry manure from it,
that is, in the far greater part of those of every extensive country,
the quantity of well-cultivated land must be in proportion to the
quantity of manure which the farm itself produces ; and this again
must be in proportion to the stock of cattle which are maintained
upon it. The land is manured either by pasturing the cattle upon
it, or by feeding them in the stable, and from thence carrying out
their dung to it. But unless the price of the cattle be sufficient to
pay both the rent and profit of cultivated land, the farmer cannot
afford to pasture them upon it ; and he can still less afford to feed
them in the stable. It is with the produce of improved and culti-
vated land only that cattle can be fed in the stable ; because to
collect the scanty and scattered produce of waste and unimproved

232 THE NATURE AND CAUSES OF BOOK i.

lands would require too much labour and be too expensive. If the
price of the cattle, therefore, is not sufficient to pay for the produce
of improved and cultivated land, when they are allowed to pasture
it, that price will he still less sufficient to pay for that produce
when it must be collected with a good deal of additional labour
and brought into the stable to them. In these circumstances,
therefore, no more cattle can with profit be fed in the stable than
what are necessary for tillage. But these can never afford manure
enough for keeping constantly in good condition all the lands
which they, are capable of cultivating. What they afford being
insufficient for the whole farm, will naturally be reserved for the
lands to which it can be most advantageously or conveniently
applied; the most ^fertile, or those perhaps in the neighbourhood
of the farm-yard. These, therefore, will be kept constantly in good
condition and fit for tillage. The rest will, the greater part of
them, be allowed to lie waste, producing scarce anything but some
miserable pasture, just sufficient to keep alive a few straggling,
half-starved cattle : the farm, though much understocked in pro-
portion to what would be necessary for its complete cultivation,
being very frequently overstocked in proportion to its actual pro-
duce. A portion of this waste land, however, after having been
pastured in this wretched manner for six or seven years together,
may be ploughed up, when it will yield, perhaps, a poor crop or two
of bad oats, or of some other coarse grain, and then, being entirely
exhausted, it must be rested and pastured again as before, and
another portion ploughed up to be in the same manner exhausted
and rested again in its turn. Such accordingly was the general
system of management all over the low country of Scotland before
the Union. The lands which were kept constantly well manured
and in good condition, seldom exceeded a third or a fourth part of
the whole farm, and sometimes did not amount to a fifth or a sixth
part of it. The rest were never manured, but a certain portion of
them was in its turn, notwithstanding, regularly cultivated and
exhausted. Under this, system of management, it is evident, even
that part of the lands of Scotland which is capable of good culti-
vation, could produce but little in comparison of what it may be
capable of producing. But how disadvantageous soever this system
may appear, yet before the Union the low price of cattle scorns to
have rendered it almost unavoidable. If, notwithstanding a great

CHAP. XL THE VlhALULju vF NATIONS. 233

rise in their price, it still continues to prevail through a con-
siderable part of the country, it is owing, in many places no
doubt, to ignorance and attachment to old customs, but in most
places to the unavoidable obstructions which the natural course of
things opposes to the immediate or speedy establishment of a better
system ; first, to the poverty of the tenants, to their not having yet
had time to acquire a stock of cattle sufficient to cultivate their
lands more completely, the same rise of price which would render
it advantageous for them to maintain a greater stock rendering
it more difficult for them to acquire it; and, secondly, to their
not having yet had time to put their lands in condition to maintain
this greater stock properly, supposing they were capable of acquir-
ing it. The increase of stock and the improvement of land are two
events which must go hand in hand, and of which the one can
nowhere much out-run the other. Without some increase of stock,
there can be scarce any improvement of land, but there can be no
considerable increase of stock but in consequence of a considerable
improvement of land ; because otherwise the land could not main-
tain it. These natural obstructions to the establishment of a better
system, cannot be removed but by a long course of frugality and
industry ; and half a century or a century more, perhaps, must pass
away before the old system, which is wearing out gradually, can
be completely abolished through all the different parts of the
country. Of all the commercial advantages, however, which
Scotland has derived from the Union with England, this rise in
the price of cattle is, perhaps, the greatest. It has not only raised
the value of all Highland estates, but it has, perhaps, been the
principal cause of the improvement of the low country. 1

In all new colonies the great quantity of waste land, which can
for many years be applied to no other purpose but the feeding of
cattle, soon renders them extremely abundant, and in everything
great cheapness is the necessary consequence of great abundance.
Though all the cattle of the European colonies in America were
originally carried from Europe, they soon multiplied so much there,

1 In the present day, the conditions of the Aberdeenshire farmer supplies the

-Scotch farming to which Adam Smith London market with the best beef. A

refers have been entirely reversed. The century ago the rotation of crops was

cultivation of the Carse of Gowrie and almost unknown in Scotland,, and the

the Lothians is superior even to that of use of artificial manures wholly,
the best tilled lands in England, and

234 THE NATURE AND CAUSES OF BOOK i.

and became of so little value, that even horses were allowed to run
wild in the woods without any owner thinking it worth while to
claim them. It must be a long time after the first establishment of
such colonies, before it can become profitable to feed cattle upon
the produce of cultivated land. The same causes, therefore, the
want of manure, and the disproportion between the stock em-
ployed in cultivation and the land which it is destined to cultivate,
are likely to introduce there a system of husbandry not unlike that
which still contkiues to take place in so many parts of Scotland.
Mr. Kalm/the Swedish traveller, when he gives an account of the
husbandry of some of the English colonies in North America, as he
found it in 1749, observes, accordingly, that he can with difficulty
discover there the character of the English nation, so well skilled in
all the different branches of agriculture. They make scarce any
manure for their own corn-fields, he says ; but when one piece of
ground has been exhausted by continual cropping, they clear and
cultivate another piece of fresh land ; and when that is exhausted,
proceed to a third. Their cattle are allowed to wander through the
woods and other uncultivated grounds, where they are half-starved ;
having long ago extirpated almost all the annual grasses by crop-
ping them too early in the spring, before they had time to form
their flowers or to shed their seeds.* The annual grasses were, it
seems, the best natural grasses in that part of North America ; and
when the Europeans first settled there, they used to grow very
thick, and to rise three or four feet high. A piece of ground
which, when he wrote, could not maintain one cow, would in
former times, he was assured, have maintained four, each of which
would have given four times the quantity of milk which that one
was capable of giving. The poorness of the pasture had, in his
opinion, occasioned the degradation of their -cattle, which dege-
nerated sensibly from one generation to another. They were
probably not unlike that stunted breed which was common all over
Scotland thirty or forty years ago, and which is now so much
mended through the greater part of the low country, not so much
by a change of the breed, though that expedient has been employed
in some places, as by a more plentiful method of feeding them.

Though it is late, therefore, in the progress of improvement
before cattle can bring sucK a price as to render it profitable to
* Kalm's Travels, vol. i. pp. 343, 344.

CHAP. xi. THE WEALTH OF NATIONS. 235

cultivate land for the sake of feeding them ; yet of all the different
parts which compose this second sort of rude produce, they are
perhaps the first which bring this price ; because till they bring it,
it seems impossible that improvement can be brought near even to
that degree of perfection to which it has arrived in many parts of
Europe.

As cattle are among the first, so perhaps venison is among the
last parts of this sort of rude produce which bring this price. The
price of venison in Breat Britain, how extravagant soever it may
appear, is not near sufficient to compensate the expense of a deer
park, as is well known to all those who have had any experience in
the feeding of deer. If it was otherwise, the feeding of deer would
soon become an article of common farming ; in the same manner as
the feeding of those small birds called Turdi was among the ancient
Romans. Yarro 1 and Columella 2 assure us that it was a most pro-
fitable article. The fattening of Ortolans, birds of passage which
arrive lean in the country, is said to be so in some parts of France.
If venison continues in fashion, and the wealth and luxury of Great
Britain increase as they have done for some time past, its price
may very probably rise still higher than it is at present.

Between that period in the progress of improvement which brings
to its height the price of so necessary an article as cattle, and that
which brings to it the price of such a superfluity as venison, there
is a very long interval, in the course of which many other sorts of
rude produce gradually arrive at their highest price, some sooner
and some later, according to different circumstances.

Thus in every farm the offals of the barn and stables will main-
tain a certain number of poultry. These, as they are fed with what
would otherwise be lost, are a mere save-all ; and as they cost the
farmer scarce anything, so he can afford to sell them for very little.
Almost all that he gets is pure gain, and their price can scarce be so
low as to discourage him from feeding this number. But in
countries ill cultivated, and therefore but thinly inhabited, the
poultry, which are thus raised without expense, are often fully
sufficient to supply the whole demand. In this state of things,
therefore, they are often as cheap as butcher's-meat or any other
sort of animal food. But the whole quantity of poultry, which the

1 De Be Ruatica, lib. iii. cap. 2. * De Re Rustica, lib. viii. cap. 10,

where ho quotes Varro.

236 THE NATURE AND CAUSES OF BOOK i.

farm in this manner produces without expense, must always be much
smaller than the whole quantity of butcher's-meat which is reared
upon it ; and in times of wealth and luxury what is rare, with only
nearly equal merit, is always preferred to what is common. As
wealth and luxury increase, therefore, in consequence of improve-
ment and cultivation, the price of poultry gradually rises above that
of butcher's-meat, till at last it gets so high that it becomes profit-
able to cultivate land for the sake of feeding them. When it has
got to this height, it cannot well go higher. If it did, more land
would soofi be turned to this purpose In several provinces of
France, the feeding of poultry is considered as a very important
article in rural economy, and sufficiently profitable to encourage the
farmer to raise a considerable quantity of Indian corn and buckwheat
for this purpose. A middling farmer will there sometimes have
four hundred fowls in his yard. The feeding of poultry seems
scarce yet to be generally considered as a matter of so much im-
portance in England. They are certainly, however, dearer in Eng-
land than in Prance, as England receives considerable supplies from
France. 1 In the progress of improvement, the period at which
every particular sort of animal food is dearest must naturally be that
which immediately precedes the general practice of cultivating land
for the sake of raising it. For some time before this practice becomes
general, the scarcity must necessarily raise the price. After it has
become general, new methods of feeding are commonly fallen upon,
which enable the farmer to raise upon the same quantity of ground
a much greater quantity of that particular sort of animal food.
The plenty not only obliges him to sell cheaper, but in consequence
of these improvements he can afford to sell cheaper ; for if he could
not afford it, the plenty would not be of long continuance. It has
been probably in this manner that the introduction of clover,
turnips, carrots, cabbages, &c. has contributed to sink the common
price of butcher's-meat in the London market somewhat below
what it was about the beginning of the last century.

The hog that finds his food among ordure, and greedily devours
many things rejected by every other useful animal, is, like poultry,
originally kept as a save-all. As long as the number of such

1 The importation of eggs from the in 1878, 783,714,720. Poultry farming
Continent has enormously increased of in England has been seriously i
late yeaw. In 1852 it was 108,281,233 ; under the large-holding system.

CHAP. xi. THE WEALTH OF NATIONS. 237

animals, which can thus be reared at little or no expense, is fully
sufficient to supply the demand, this sort of butcher's-meat comes
to market at a much lower price than any other. But when the
demand rises beyond what this quantity can supply, when it
becomes necessary to raise food on purpose for feeding and fattening
hogs, in the same manner as for feeding and fattening other cattle,
the price necessarily rises, and becomes proportionably either higher
or lower than that of other butcher's-meat, according as the nature
of the country and the state of its agriculture happen to render the
feeding of hogs more or less expensive than that of other cattle. In
France, according to M. Buflbn, 1 the price of pork is nearly equal
to that of beef. In most parts of Great Britain it is at present
somewhat higher.

The great rise in the price both of hogs and poultry has in Great
Britain been frequently imputed to the diminution of the number
of cottagers and other small occupiers of land ; an event which has
in every part of Europe been the immediate forerunner of improve-
ment and better cultivation, but which at the same time may have
contributed to raise the price of those articles, both somewhat sooner
and somewhat faster than it would otherwise have risen. As the
poorest family can often maintain a cat or a dog without any
expense, so the poorest occupiers of land can commonly maintain a
few poultry, or a sow and a few pigs, at very little. The little
oflals of their own table, their whey, skimmed milk, and butter-
milk, supply those animals \\ith a part of their food, and they find
the rest in the neighbouring fields without doing any sensible damage
to anybody. By diminishing the number of those small occupiers,
therefore, the quantity of this sort of provisions which is thus pro-
duced at little or no expense, must certainly have been a good deal
diminished, and their price must consequently have been raised both
sooner and faster than it would otherwise have risen. Sooner or
later, however, in the progress of improvement, it must at any rate
have risen to the utmost height to which it is capable of rising; or
to the price which pays the labour and expense of cultivating the
land which furnishes them with food as well as these are paid upon
the greater part of other cultivated land.

The business of the dairy, like the feeding of hogs and poultry, is
originally carried on as a save-all. The cattle necessarily kept

1 Histoire Naturelle, vol. v.

238 THE NATURE AND CAUSES OF BOOK i.

upon the farm, produce more milk than either the rearing of their
own young or the consumption of the farmer's family requires ; and
they produce most at one particular season. But of all the produc-
tions of land, milk is perhaps the most perishable. In the warm
season, when it is most abundant, it will scarce keep four-and-
twenty hours. The farmer, by making it into fresh butter, stores
a small part of it for a week : by making it into salt butter, for
a year : and by making it into cheese, he stores a much greater
part of it for several years. Part of all these is reserved for the use
of his own^family. The rest goes to market, in order to find the
best price which is to be had, and which can scarce be so low as to
discourage him from sending thither whatever is over and above the
use of his own family. If it is very low indeed, he will be likely
to manage his dairy in a very slovenly and dirty manner, and will
scarce perhaps think it worth while to have a particular room or
building on purpose for it, but will suffer the business to be carried
on amidst the smoke, filth, and nastincss of his own kitchen ; as
was the case of almost all the farmers' dairies in Scotland thirty or
forty years ago, and as is the case of many of them still. The same
causes which gradually raise the price of butch er's-meat, the increase
of the demand, and, in consequence of the improvement of the
country, the diminution of the quantity which can be fed at little or
no expense, raise, in the same manner, that of the produce of the
dairy, of which the price naturally connects with that of butcher's-
meat, or with the expense of feeding cattle. The increase of price
pays for more labour, care, and cleanliness. The dairy becomes
more worthy of the farmer's attention, and the quality of its pro-
duce gradually improves. The price at last gets so high that it
becomes worth while to employ some of the most fertile and best
cultivated lands in feeding cattle merely for the purpose of the
dairy ; and when it has got to this height, it cannot well go higher.
If it did, more land would soon be turned to this purpose. It seems
to have got to this height through the greater part of England,
where much good land is commonly employed in this manner. If
you except the neighbourhood of a few considerable towns, it seems
not yet to have got to this height anywhere in Scotland, where
common farmers seldom employ much good land in raising food for
cattle merely for the purpose of the dairy. The price of the produce,
though it has risen very considerably within these few years, is

CHAP. xi. THE WEALTH OF NATIONS. 239

probably still to low too admit of it. The inferiority of the quality,
indeed, compared with that of the produce of English dairies, is
fully equal to that of the price. But this inferiority of quality is,
perhaps, rather the effect of this lowness of price than the cause of
it. Though the quality was much better, the greater part of what
is brought to market could not, I apprehend, in the present circum-
stances of the country, be disposed of at a much better price ; and
the present price, it is probable, would not pay the expense of the
land and labour necessary for producing a much better quality.
Through the greater part of England, notwithstanding the supe-
riority of price, the dairy is not reckoned a more profitable employ-
ment of land than the raising of corn or the fattening of cattle, the
two great objects of agriculture. Through the greater part of
Scotland, therefore, it cannot yet be even so profitable.

The lands of no country, it is evident, can ever be completely culti-
vated and improved, till once the price of every produce, which human
industry is obliged to raise upon them, has got so high as to pay
for the expense of complete improvement and cultivation. In order
to do this, the price of each particular produce must be sufficient,
first, to pay the rent of good corn land, as it is that which regulates
the rent of the greater part of other cultivated land ; and, secondly,
to pay the labour and expense of the farmer as well as they are
commonly paid upon good corn land ; or, in other words, to replace
with the ordinary profits the stock which he employs about it.
This rise in the price of each particular produce must evidently be
previous to the improvement and cultivation of the land which is
destined for raising it. Gain is the end of all improvement, and
nothing could deserve that name of which loss was to be the neces-
sary consequence. But loss must be the necessary consequence of
improving land for the sake of a produce of which the price could
never bring back the expense. If the complete improvement and
cultivation of the country be, as it most certainly is, the greatest of
all public advantages, this rise in the price of all those different
sorts of rude produce, instead of being considered as a public cala-
mity, ought to be regarded as the necessary forerunner and attendant
of the greatest of all public advantages.

This rise too in the nominal or money price of all those different
sorts of rude produce has been the effect, not of any degradation in_
the value of silver, but of a rise in their real price. They have

240 THE NATURE AND CAUSES OF BOOK i.

become worth, not only a greater quantity of silver, but a greater
quantity of labour and subsistence than before. As it costs a
greater quantity of labour and subsistence to bring them to market,
so when they are brought thither, they represent or are equivalent
to a greater quantity.

Third Sort.

The third and last sort of rude produce, of which the price
naturally rises in the progress of improvement, is that in which the
efficacy of human industry, in augmenting the quantity, is either
limited or uncertain. Though the real price of this sort of rude
produce, therefore, naturally tends to rise in the progress of im-
provement, yet, according as different accidents happen to render
the efforts of human industry more or less successful in augmenting
the quantity, it may happen sometimes even to fall, sometimes to
continue the same in very different periods of improvement, and
sometimes to rise more or less in the same period.

There are some sorts of rude produce which nature has rendered
a kind of appendages to other sorts ; so that the quantity of the
one which any country can afford, is necessarily limited by that of
the other. The quantity of wool or of raw hides, for example,
which any country can afford, is necessarily limited by the number
of great and small cattle that are kept in it. The state of its im-
provement and the nature of its agriculture, again, necessarily,
determine this number.

The same causes, which, in the progress of improvement, gradu-
ally raise the price of butcher's-meat, should have the same effect, it
may be thought, upon the prices of wool and raw hides, and raise
them, too, nearly in the same proportion. It probably would be so,
if in the rude beginnings of improvement the market for the latter
commodities was confined within as narrow bounds as that for the
former. But the extent of their respective markets is commonly
extremely different.

The market for butcher's-meat is almost everywhere confined to
the country which produces it. Ireland and some part of British
America, indeed, carry on a considerable trade in salt provisions ;
but they are, I believe, the only countries in the commercial world
which do so, or which export to other countries any considerable
part of their butcher's-meat.

CHAP. XT. THE WEALTH OF NATIONS. 241

The market for wool and raw hides, on the contrary, is in the
rude beginnings of improvement very seldom confined to the coun-
try which produces them. They can easily be transported to distant
countries, wool without any preparation, and raw hides with very
little : and as they are the materials of many manufactures, the
industry of other countries may occasion a demand for them, though
that of the country which produces them might not occasion any.

In countries ill cultivated, and therefore but thinly inhabited,
the price of the wool and the hide bears always a much greater
proportion to that of the whole beast, than in countries where,
improvement and population being further advanced, there is more
demand for butchers-meat. Mr. Hume observes, that in the Saxon
times the fleece was estimated at two-fifths of the value of the
whole sheep, and that this was much above the proportion of its
present estimation. In some provinces of Spain, I have been as-
sured, the sheep is frequently killed merely for the sake of the fleece
and the tallow. The carcase is often left to rot upon the ground,
or to be devoured by beasts and birds of prey. If this sometimes
happens even in Spain, it happens almost constantly in Chili, at
Buenos Ayres, and in many other parts of Spanish America, where
the horned cattle are almost constantly killed merely for the sake of
the hide and the tallow. This, too, used to happen almost con-
stantly in Hispaniola, while it was infested by the Buccaneers, and
before the settlement, improvement, and populousnoss of the French
plantations (which now extend round the coast of almost the whole
western half of the island) had given some value to the cattle of the
Spaniards, who still continue to possess not only the eastern part
of the coast, but the whole inland and mountainous part of the
country.

Though in the progress of improvement and population the price
of the whole beast necessarily rises, yet the price of the carcase is
likely to be much more affected by this rise than that of the wool
and the hide. The market for the carcase, being in the rude state
of society confined always to the country which produces it, must
necessarily be extended in proportion to the improvement and
population of that country. But the market for the wool and the
hides even of a barbarous country often extending to the whole
commercial world, it can very seldom be enlarged in the same pro-
portion. The state of the whole commercial world can seldom be

VOL. I. B

242 THE NATURE AND CAUSES OF BOOK j.

much affected by the improvement of any particular country ; and
the market for such commodities may remain the same, or very
nearly the same, after such improvements as before. It should
however, in the natural course of things, rather upon the whole be
somewhat extended in consequence of them. If the manufactures,
especially, of which those commodities are the materials, should ever
come to flourish in the country, the market, though it might not
be much enlarged, would at least be brought much nearer to the
place of growth than before, and the price of those materials might
at least be^ increased by what had usually been the expense of
transporting them to distant countries. Though it might not rise,
therefore, in the same proportion as that of butcher's-meat, it ought
naturally to rise somewhat, and it ought certainly not to fall.

In England, however, notwithstanding the flourishing state of its
woollen manufacture, the price of English wool has fallen very con-
siderably since the time of Edward III. There are many authentic
records which demonstrate that during the reign of that prince
(towards the middle of the fourteenth century, or about 1339) what
was reckoned the moderate and reasonable price of the tod or
twenty-eight pounds of English wool was not less than ten shillings
of the money of those times,* containing, at the rate of twenty-
pence the ounce, six ounces of silver, Tower-weight, equal to about
thirty shillings of our present money. In the present times, one-
and-twenty shillings the tod may be reckoned a good price for very
good English wool. The money price of wool therefore, in the
time of Edward III, was to its money price in the present time as
ten to seven. The superiority of its real price was still greater.
At the rate of six shillings and eightpence the quarter, ten shillings
was in those ancient times the price of twelve bushels of wheat.
At the rate of twenty-eight shillings the quarter, one-and-twenty
shillings is in the present times the price of six bushels only. The
proportion between the real prices of ancient and modern times,
therefore, is as twelve to six, or as two to one. In those ancient
times a tod of wool would have purchased twice the quantity of
subsistence which it will purchase at present ; and consequently
twice the quantity of labour, if the real recompense of labour had
been the same in both periods. 1

* See Smith's Memoirs of Wool, vol. i. Middle Ages, see the Editor's Agriculture
C. 5, 6, and 7 ; also, vol. ii. c. 176. and Prices, vol.i. chaps. 17, 1 8. For later

1 For the price of wool and hides in the prices see the Appendix to this volume.

CHAP. xi. THE WEALTH OF NATIONS. 243

This degradation, both in the real and nominal value of wool,
could never have happened in consequence of the natural course of
things. It has, accordingly, been the effect of violence and artifice :
first, of the absolute prohibition of exporting wool from England ;
secondly, of the permission of importing it from Spain duty free ;
thirdly, of the prohibition of exporting it from Ireland to any other
country but England. In consequence of these regulations the
market for English wool, instead of being somewhat extended in
consequence of the improvement of England, has been confined to
the home market, where the wool of several other countries is
allowed to come into competition with it, and where that of Ireland
is forced into competition witli it. As the woollen manufactures,
too, of Ireland are fully as much discouraged as is consistent with
justice and fair dealing, the Irish can work up but a small part
of their own wool at home, and are, therefore, obliged to send a
greater proportion of it to Great Britain, the only market they are
allowed. 1

I have not been able find any such authentic records concern-
ing the price of raw hides in ancient times. Wool was commonly
paid as a subsidy to the king, and its valuation in that subsidy
ascertains, at least in some degree, what was its ordinary price.
But this seems not to have been the case with raw hides. Fleet-
wood, however, from an account in 1435, between the Prior of
Burcester, 2 Oxford, and one of his canons, gives us their price, at
least as it was stated upon that particular occasion ; viz. five
ox-hides at twelve shillings; five cow-hides at seven shillings
and threepence ; thirty-six sheep-skins of two years old at nine
shillings ; sixteen calves-skins at two shillings. In 1425, twelve
shillings contained about the same quantity of silver as four-and-
twenty shillings of our present money. An ox-hide, therefore, was
in this account valued at the same quantity of silver as 4f <?. of our
present money. Its nominal price was a good deal lower than at
present. But at the rate of six shillings and ei^htpence the quarter,
twelve shillings would in those times have purchased fourteen
bushels and four-fifths of a bushel of wheat, which, at three shiK
lings and sixpence the bushel, would in the present times cost

1 The prohibition was repealed in 1825, on foreign wool, imposed in 1802, were
and a low export duty substituted. This abolished in 1844.
was relinquished in 1833. The duties a Now Bicester.

K 3

244 THE NATURE AND CAUSES OF BOOK i.

. 4^. An ox-hide, therefore, would in those times have pur-
chased as much corn as ten shillings and threepence would purchase
at present. Its real value was equal to ten shillings and threepence of
our present money. In those ancient times, when the cattle were half
starved during the greater part of the winter, we cannot suppose
that they were of a very large size. 1 An ox-hide which weighs four
stone of sixteen pounds avoirdupois is not in the present times
reckoned a bad one, and in those ancient times would probably have
been reckoned a very good one. But at half-a-crovvn a stone, which
at this moment (February, 17 73) I understand to be the common
price, such a hide would at present cost only ten shillings. Though
its nominal price, therefore, is higher in the present than it was in
those ancient times, its real price, the real quantity of subsistence
which it will purchase or command, is rather somewhat lower. The
price of cow-hides, as stated in the above account, is nearly in the
common proportion to that of ox-hides. That of sheep-skins is a
good deal above it. They had probably been sold with the wool.
That of calves-skins, on the contrary, is greatly below it. In
countries where the price of cattle is very low, the calves which arc
not intended to be reared in order too keep up the stock are gene-
rally killed very young ; as was the case in Scotland twenty or
thirty years ago. It saves the milk, which their price would not
pay for. Their skins, therefore, are commonly good for little.

The price of raw hides is a good deal lower at present than it
was a few years ago ; owing, probably, to the taking off the duty
upon seal-skins, and to the allowing, for a limited time, the import-
ation of raw hides from Ireland and from the Plantations duty free,
which was done in 1 769. Take the whole of the present century at
an average, their real price has probably been somewhat higher than
it was in those ancient times. The nature of the commodity renders
it not quite so proper for being transported to distant markets as
wool. It suffers more by keeping. A salted hide is reckoned in-
ferior to a fresh one, and sells for a lower price. This circumstance
must necessarily have some tendency to sink the price of raw hides
produced in a country which docs not manufacture them, but is
obliged to export them ; and, comparatively, to raise that of those
produced in a country which does manufacture them. It must have

1 For the average weight of oxen in the Middle Ages, see the Editor's Agriculture
and Prices, vol. i. p. 328.

CHAP. xi. THE WEALTH OF NATIONS. 245

some tendency to sink their price in a barbarous, and to raise it in
an improved and manufacturing country. It must have had some
tendency, therefore, to sink it in ancient, and to raise it in modern
times. Our tanners, besides, have not been quite so successful as
our clothiers in convincing the wisdom of the nation that the safety
of the commonwealth depends upon the prosperity of their particular
manufacture. They have accordingly been much less favoured.
The exportation of raw hides has, indeed, been prohibited, and
declared a nuisance ; but their importation from foreign countries
has been subjected to a duty; and though this duty has been taken
off from those of Ireland and the Plantations (for the limited time
of five years only), yet Ireland has not been confined to the market
of Great Britain for the sale of iis surplus hides, or of those which
are not manufactured at home. The hides of common cattle have but
within these few years been put among the enumerated commodities
which the Plantations can send nowhere but to the mother country;
neither has the commerce of Ireland been in this case oppressed
hitherto, in order to support the manufactures of Great Britain.,

Whatever regulations tend to sink the price cither of wool or of
raw hides below what it naturally would be, must, in an improved
and cultivated country, have some tendency to raise the price of
butcher's-meat. 1 The price both of the great and small cattle,
which are fed on improved arid cultivated land, must be sufficient
to pay the rent which the landlord and the profit which the farmer
has reason to expect from improved and cultivated land. If it is
not, they will soon cease to feed them. Whatever part of this
price, therefore, is not paid by the wool and the hide, must be paid
by the carcase. The less there is paid for the one, the more must
be paid for the other. In what manner this price is to be divided
upon the different parts of the beast, is indifferent to the landlords
and farmers, provided it is all paid to them. In an improved and
cultivated country, therefore, their interest as landlords and farmers

1 When the capital of any producer is products of the principal produce are of

employed in the supply of a lar^e number such considerable value, that the manu-

of products which are simultaneously and facturer is able, at the ordinary rate of

conjointly supplied, the increased demand profit on capital, to sell the principal pro-

for one of these may lower the price of the duct at little or no more than the cost of

others to a minimum. For example, the production. This compensative feature

Australian sheep-masters get so consider- in joint products must constantly be

able a profit from their wool, that they taken into account in the interpretation

can soil mutton at a nominal price. of prices;
Again, in some manufactures the bye-

246 THE NATURE AND CAUSES OF BOOK I.

cannot be much affected by such regulations, though their interest
as consumers may, by the rise in the price of provisions. It would
be quite otherwise, however, in an unimproved and uncultivated
country, where the greater part of the lands could be applied to no
other purpose but the feeding of cattle, and where the wool and the
hide made the principal part of the value of those cattle. Their
interest as landlords and farmers would in this case be very deeply
affected by such regulations, and their interest as consumers very
little. The fall in the price of the wool and the hide would not in
this case raise the price of the carcase, because the greater part of
the lands of the country being applicable to no other purpose but
the feeding of cattle, the same number would still continue to be
fed. The same quantity of butcher's-meat would still come to
market. The demand for it would be no greater than before.
Its price, therefore, would be the same as before. The whole
price of cattle would fall, and along with it both the rent and
the profit of all those lands of which cattle was the principal pro-
duce, that is, of the greater part of the lands of the country. The
perpetual prohibition of the exportation of wool, which is commonly,
but very falsely, ascribed to Edward III, 1 would, in the then
circumstances of the country, have been the most destructive regu-
lation which could well have been thought of. It would not only
have reduced the actual value of the greater part of the lands of the
kingdom, but by reducing the price of the most important species
of small cattle, it would have retarded very much its subsequent
improvement.

The wool of Scotland fell very considerably in its price in con-
sequence of the Union with England, by which it was excluded from
the great market of Europe, and confined to the narrow one of
Great Britain. The value of the greater part of the lands in the
southern counties of Scotland, which are chiefly a sheep country,
would have been very deeply affected by this event, had not the rise
in the price of butcher's-meat fully compensated the fall in the price
of wool.

As the efficacy of human industry in increasing the quantity

1 By 36 Edw. Ill, cap. 1 1, the exporta- capital felony. Blackstone absurdly said

tion of wool and woolfells was absolutely that the export of wool was forbidden by

forbidden. But the statute was merely the common law. See Hallam's Middle

temporary, as also that of 1 1 Edw. Ill, Ages, cap. 9. part ii.
cap. i, which made its exportation a

CHAP. xi. THE WEALTH OF NATIONS. 247

either of wool or of raw hides is limited, so far as it depends upon
the produce of the country where it is exerted, so it is uncertain, so
far as it depends upon the produce of other countries. It so far
depends, not so much upon the quantity which they produce, as
upon that which they do not manufacture ; and upon the restraints
which they may or may not think proper to impose upon the export-
ation of this sort of rude produce. These circumstances, as they
are altogether independent of domestic industry, so they necessarily
render the efficacy of its efforts more or less uncertain. In multi-
plying this sort of rude produce, therefore, the efficacy of human
industry is not only limited, but uncertain.

In multiplying another very important sort of rude produce, the
quantity of fish that is brought to market, it is likewise both limited
and uncertain. It is limited by the local situation of the country,
by the proximity or distance of its different provinces from the sea,
by the number of its lakes and rivers, and by what may be called
the fertility or barrenness of those seas, lakes, and rivers, as to this
sort of rude produce. As population increases, as the annual pro-
duce of the land and labour of the country grows greater and
greater, there come to be more buyers of fish, and those buyers too
have a greater quantity and variety of other goods, or, what is the
same thing, the price of a greater quantity and variety of other
goods, to buy with. But it will generally be impossible to supply
the great and extended market without employing a quantity of
labour greater than in proportion to what had been requisite for
supplying the narrow and confined one. 1 A market which, from
requiring only one thousand, comes to require annually ten thousand
ton of fish, can seldom be supplied without employing more than
ten times the quantity of labour which had before been sufficient
to supply it. The fish must generally be sought for at a greater
distance, larger vessels must be employed, and more expensive
machinery of every kind made use of. The real price of this com-
modity, therefore, naturally rises in the progress of improvement. It
has accordingly done so, I believe, more or le.-s in every country.

1 The rule laid down in the text is since it is the width of the market which
relative only to those kinds of produce stimulates labour, divides employment,
an increase in the quantity of which can and suggests improvements in the pro-
be procured only by greater comparative cess. The degree to which this stimulus
labour. But ordinarily, the wider the is effectual is determined by the nature
market the cheaper is the production, of the occupation.

248 THE NATURE AND CAUSES OF BOOK i.

Though the success of a particular day's fishing may be very
uncertain matter, yet, the local situation of the country being
supposed, the general efficacy of industry in bringing a certain
quantity of fish to market, taking the course of a year, or of several
years together, it may perhaps be thought, is certain enough ; and
it, no doubt, is so. As it depends more, however, upon the local
situation of the country, than upon the state of its wealth and
industry; as upon this account it may in different countries be the
same in very different periods of improvement, and very different in
the same period ; its connexion with the state of improvement is un-
certain, and it is of this sort of uncertainty that I am here speaking.

In increasing the quantity of the different minerals and metals
which are drawn from the bowels of the earth, that of the more
precious ones particularly, the efficacy of human industry seems not
to be limited, but to be altogether uncertain.

The quantity of the precious metals which is to be found in any
country is not limited by anything in its local situation, such as the
fertility or barrenness of its own mines. Those metals frequently
abound in countries which possess no mines. Their quantity in
every particular country seems to depend upon two different circum-
stances : first, upon its power of purchasing, upon the state of its
industry, upon the annual produce of its land and labour, in con-
sequence of which it can afford to employ a greater or a smaller
quantity of labour and subsistence in bringing or purchasing such
superfluities as gold and silver, either from its own mines or from
those of other countries ; and secondly, upon the fertility or barren-
ness of the mines which may happen at any particular time to
supply the commercial world with those metals. The quantity of
those metals in the countries most remote from the mines must be
more or less affected by this fertility or barrenness, on account of the
easy and cheap transportation of those metals, of their small bulk and
great value. Their quantity in China and Hindostan must have been
more or less affected by the abundance of the mines of America. 1

So far as their quantity in any particular country depends upon

1 The distribution of the precious which the exchange can bo effected. A

metals is effected by exactly the same little investigation of the mechanism by

agencies as those which distribute other which this country has been the agent

products. Payments by these metals in for distributing the new gold and silver

place of payments by goods have been which have been discovered during the

adopted in international trade, only be- last fifteen or twenty years will show how

cause the metals are the cheapest form in exactly this process has been carried out.

CHAP. XL THE WE ALT U OF NATIONS. 249

the former of those two circumstances (the power of purchasing),
their real price, like that of all other luxuries and superfluities, is
likely to rise with the wealth and improvement of the country, and
to fall with its poverty and depression. Countries which have a
great quantity of lahour and subsistence to spare can afford to pur-
chase any particular quantity of those metals at the expense of a
greater quantity of labour and subsistence than countries which
have less to spare.

So far as their quantity in any particular country depends upon
the latter of those two circumstances (the fertility or barrenness of
the mines which happen to supply the commercial world), their real
price, the real quantity of labour and subsistence which they will
purchase or exchange for, will, no doubt, sink more or less in pro-
portion to the fertility, and rise in proportion to the barrenness of
those mines.

The fertility or barrenness of the mines, however, which may
happen, at. any particular time to supply the commercial world, is a
circumstance which, it is evident, may have no sort of connexion
with the state of industry in a particular country. It seems even
to have no very necessary connexion with that of the world in
general. As arts and commerce, indeed, gradually spread them-
selves over a greater and a greater part of the earth, the search for
new mines, being extended over a wider surface, may have some-
what a better chance for being successful than when confined within
narrower bounds. The discovery of new mines, however, as the
old ones come to be gradually exhausted, is a matter of the greatest
uncertainty, and such as no human skill or industry can ensure. All
indications, it is acknowledged, are doubtful, and the actual dis-
covery and successful working of a new mine can alone ascertain
the reality of its value, or even of its existence. In this search
there seem to be no certain limits either to the possible success or
to the possible disappointment of human industry. In the course of
a century or two it is possible that new mines may be discovered
more fertile than any that have ever yet been Known ; and it is just
equally possible that the most fertile mine then known may be more
barren than any that was wrought before the discovery o!' the mines
of America. 1 Whether the one or the other of those two events

1 Between the years 1849-1878 it is cal- and silver at 472,000,000 have been
culated that gold valued at 851,000,000 added to the stock of precious metals in

250 THE NATURE AND CAUSES OF BOOK i.

may happen to take place is of very little importance to the real
wealth and prosperity of the world, to the real value of the annual
produce of the land and labour of mankind. Its nominal value, the
quantity of gold and silver by which this annual produce could be
expressed or represented, would, no doubt, be very different ; but
its real value, the real quantity of labour which it could purchase or
command, would be precisely the same. A shilling might in the
one case represent no more labour than a penny does at present ;
and a penny in the other might represent as much as a shilling does
now. But in the one case he who had a shilling in his pocket
would be tfo richer than he who has a penny at present ; and in the
other, he who had a penny would be just as rich as he who has a
shilling now. The cheapness and abundance of gold and silver
plate would be the sole advantage which the world could derive
from the one event, and the dearness and scarcity of those trifling
superfluities the only inconvenience it could suffer from the other. 1

Conclusion of the Digression concerning the Variations in ike Value

of Silver.

The greater part of the writers who have collected the money
prices of things in ancient times, seem to have considered the low
money price of corn, and of goods in general, or, in other words,
the high value of gold and silver, as a proof, not only of the
scarcity of those metals, but of the poverty and barbarism of the
country at the time when it took place. This notion is connected
with the system of Political Economy which represents national
wealth as consisting in the abundance, and national poverty in the
scarcity, of gold and silver ; a system which I shall endeavour to
explain and examine at great length in the Fourth Book of this

the world. Of this gold, 500,000,000 had their immediate effects in widening

have been added from new sources. At the markets and promoting the occupa-

present, however, it appears that the tion of the world. Besides, as commerce

supply is declining, and it is affirmed advances, any inadequate supply of these

that the annual produce is not more than metals would continually tend to lower

sufficient to meet the requirements of prices, and so to derange trade. It is

trade. In the eight years 1861-1868, the of great consequence that these metals

latter demand absorbed 113,000,000 of should be continuously procured in

the precious metals. Since this period, nearly equal quantities by nearly equal

the demand has increased with the labour, and that, though ' a fixed value

extension of trade. of these metals is a mere impossibility,

1 Smith underrates the importance of there should be as little fluctuation in

a continuous supply of the precious their value as possible,
metals. Both gold and silver mining have

CHAP. xi. THE WEALTH OF NATIONS. 251

Inquiry. I shall only observe at present that the high value of the
precious metals can be no proof of the poverty or barbarism of any
particular country at the time when it took place. It is a proof
only of the barrenness of the mines which happened at that time to
supply the commercial world. A poor country, as it cannot afford
to buy more, so it can as little afford to pay dearer for gold and
silver than a rich one ; and the value of those metals, therefore, is
not likely to be higher in the former than in the latter. In China,
a country much richer than any part of Europe, the value of the
precious metals is much higher than in any part of Europe. As
the wealth of Europe, indeed, has increased greatly since the
discovery of the mines of America, so the value of gold and silver
has gradually diminished. This diminution of their value, however,
has not been owing to the increase of the real wealth of Europe, of
the annual produce of its land and labour, but to the accidental
discovery of more abundant mines than any that were known
before. 1 The increase of the quantity of gold and silver in Europe,
and the increase of its manufactures and agriculture, are two events
which, though they have happened nearly about the same time, yet
have arisen from very different causes, and have scarce any natural
connexion with one another. The one has arisen from a mere
accident, in which neither prudence nor policy either had or could
have any share : the other from the fall of the feudal system and
from the establishment of a government which afforded to industry
the only encouragement which it requires, some tolerable security
that it shall enjoy the fruits of its own labour. Poland, where the
feudal system still continues to take place, is at this day as beggarly
a country as it was before the discovery of America. The money
price of corn, however, has risen ; the real value of the precious
metals has fallen in Poland in the same manner as in other parts of
Europe. Their quantity, therefore, must have increased there as in
other places, and nearly in the same proportion to the annual pro-
duce of its land and labour. This increase of the quantity of those
metals, however, has not, it seems, increased that annual produce,
has neither improved the manufactures and agriculture of the
country, nor mended the circumstances of its inhabitants. Spain

1 And we must add, to the peculiar metals are likely to be permanently
circumstances under which these stocks depreciated again, as long as they are
of the precious metals were procured. procurable only under the ordinary con-
There is no reason to believe that these ditions of voluntary labour.

252 THE NATURE AND CAUSES OF BOOK i.

and Portugal, the countries which possess the mines, are, after
Poland, perhaps the two most beggarly countries in Europe. The
value of the precious metals, however, must be lower in Spain and
Portugal than in any other part of Europe; as they come from
those countries to all other parts of Europe loaded, not only with
a freight and an insurance, but with the expense of smuggling,
their exportation being either prohibited or subjected to a duty.
In proportion to the annual produce of the land and labour, there-
fore, their quantity must be greater in those countries than in any
other part of Europe: those countries, however, are poorer than
the greate* part of Europe. Though the feudal system has been
abolished in Spain and Portugal, it has not been succeeded by
a much better.

As the low value of gold and silver, therefore, is no proof of the
wealth and flourishing state of the country where it takes place ;
so neither is their high value, or the low money price either of
goods in general, or of corn in particular, any proof of its poverty
and barbarism.

But though the low money price either of goods in general, or of
corn in particular, be no proof of the poverty or barbarism of the
times, the low money price of some particular sorts of goods, such
as cattle, poultry, game of all kinds, &c. in proportion to that of
corn, is a most decisive one. It clearly demonstrates, first, their
great abundance in proportion to that of corn, and consequently the
great extent of the land which they occupied in proportion to what
was occupied by corn ; and, secondly, the low value of this land in
proportion to that of corn land, and consequently the uncultivated
and unimproved state of the far greater part of the lands of the
country. It clearly demonstrates that the stock and population
of the country did not bear the same proportion to the extent of
its territory which they commonly do in civilised countries, and
that society was at that time and in that country but in its
infancy. From the high or low money price either of goods in
general or of corn in particular, we can infer only that the mines
which at that time happened to supply the commercial world with
gold and silver were fertile or barren, not that the country was
rich 01* poor. But from the high or low money price of some sorts
of goods in proportion to that of others, we can infer with a degree
of probability that approaches almost to certainty, that it was rich

CHAP. xi. THE WEALTH OF NATIONS. 253

or poor, that the greater part of its lands were improved or un-
improved, and that it was either in a more or less barbarous state,
or in a more or less civilised one.

Any rise in the money price of goods which proceeded altogether
from the degradation of the value of silver, would affect all sorts of
goods equally, and raise their price universally a third, or a fourth,
or a fifth part higher, according as silver happened to lose a third,
or a fourth, or a fifth part of its former value. But the rise in the
price of provisions, which has been the subject of so much reasoning
and conversation, does not affect all sorts of provisions equally.
Taking the course of the present century at an average, the price of
corn, it is acknowledged, even by those who account for this rise by
the degradation of the value of silver, has risen much less than that
of some other sorts of provisions. The rise in the price of those
other sorts of provisions, therefore, cannot be owing altogether to
the degradation of the value of silver. Some other causes must be
taken into the account, and those which have been above assigned
will perhaps, without having recourse to the supposed degradation
of the value of silver, sufficiently explain this rise in those particular
sorts of provisions of which the price has actually risen in proportion
to that of corn.

As to the price of corn itself, it has, during the sixty-four first
years of the present century, arid before the late extraordinary course
of bad seasons, been somewhat lower than it was during the sixty-
four last years of the preceding century. This fact is attested, not
only by the accounts of Windsor market, but by the public fiars of
all the different counties of Scotland, and by the accounts of several
different markets in France, which have been collected with great
diligence and fidelity by M. Messance 1 and M. Dupre de St.
Maur. 2 The evidence is more complete than could well have been
expected in a matter which is naturally so very difficult to be ascer-
tained.

As to the high price of corn during these last ten or twelve years,
it can be sufficiently accounted for from the badness of the seasons,
without supposing any degradation in the value of silver.

The opinion, therefore, that silver is continually sinking in its

1 Reckeruhes sur la Population des 2 Essai sur les Monnoies, ou Reflexions

G&uSralite's d'Auverghe, de Lyon, de sur le Eapport entre TArgent et les

Rouen, &c. depuis 1674 jusqu'en 1764. Denies. Paris, 1746.
Paris, 1766.

254 THE NATURE AND CAUSES OF BOOK i.

value, seems not to be founded upon any good observations, either
upon the prices of corn or upon those of other provisions.

The same quantity of silver, it may perhaps be said, will in the
present times, even according to the account which has been here
given, purchase a much smaller quantity of several sorts of pro-
visions than it would have done during some part of the last
century; and to ascertain whether this change be owing to a rise
in the value of those goods, or to a fall in the value of silver, is
only to establish a vain and useless distinction, which can be of no
sort of service to the man who has only a certain quantity of silver
to go to market with, or a certain fixed revenue in money. I
certainly do not pretend that the knowledge of this distinction
will enable him to buy cheaper. It may not, however, upon that
account be altogether useless.

It may be of some use to the public by affording an easy proof
of the prosperous condition of the country. If the rise in the price
of some sorts of provisions be owing altogether to a fall in the value
of silver, it is owing to a circumstance from which nothing can be
inferred but the fertility of the American mines. The real wealth
of the country, the annual produce of its laud and labour, may,
notwithstanding this circumstance, be either gradually declining, as
in Portugal and Poland ; or gradually advancing, as in most other
parts of Europe. But if this rise in the price of some sorts of
provisions be owing to a rise in the real value of the land which
produces them, to its increased fertility; or in consequence of more
extended improvement and good cultivation, to its having been
rendered fit for producing corn ; it is owing to a circumstance
which indicates in the clearest manner the prosperous and advanc-
ing state of the country. The land constitutes by far the greatest,
the most important, and the most durable part of the wealth of
every extensive country. 1 It may surely be of some use, or at
least it may give some satisfaction to the public, to have so
decisive a proof of the increasing value of by far the greatest,
the most important, and the most durable part of its wealth.

It may too be of some use to the public in regulating the
pecuniary reward of some of its inferior servants. If this rise in

1 The laud of a country is in no sense the industrial skill of its people. The
its wealth. Its wealth consists in the author is here betraying his sympathies
accumulated products of labour, and in with the theories of the Economists.

CHAP. xi. THE WEALTH OF NATIONS. 255

the price of some sorts of provisions be owing 1 to a fall in the value
of silver, their pecuniary reward, provided it was not too large
before, ought certainly to be augmented in proportion to the extent
of this fall. If it is not augmented, their real recompense will
evidently be so much diminished. But if this rise of price is owing
to the increased value, in consequence of the improved fertility of
the land which produces such provisions, it becomes a much nicer
matter to judge either in what proportion any pecuniary reward
ought to be augmented or whether it ought to be augmented at all.
The extension of improvement and cultivation, as it necessarily
raises more or less, in proportion to the price of corn, that of every
sort of animal food, so it as necessarily lowers that of, I believe,
every sort of vegetable food. It raises the price of animal food ;
because a great part of the land which produces it, being rendered
fit for producing corn, must afford to the landlord and farmer the
rent and profit of corn land. It lowers the price of vegetable food ;
because, by increasing the fertility of the land, it increases its
abundance. The improvements of agriculture too introduce many
sorts of vegetable food, which, requiring less land and not more
labour than corn, come much cheaper to market. Such arc potatoes
and maize, or what is called Indian corn, the two most important
improvements which the agriculture of Europe, perhaps which
Europe itself, has received from the great extension of its com-
merce and navigation. Many sorts of vegetable food, besides,
which in the rude state of agriculture are confined to the kitchen-
garden and raised only by the spade, come in its improved state to
be introduced into common fields, and to be raised by the plough :
such as turnips, carrots, cabbages, &c. If in the progress of im-
provement, therefore, the real price of one species of food necessarily
rises, that of another as necessarily falls, and it becomes a matter of
more nicety to judge how far the rise in the one may be com-
pensated by the fall in the other. 1 When the real price of
butcher's-meat has once got to its height (which with regard to
every sort, except perhaps that of hogs-flesh, it seems to have
done through a great part of England more than a century ago),
any rise which can afterwards happen in that of any other sort of

1 The passage in the text is amply rendered an increase of population pos-
verified by later experience. The pro- sible, has lowered the price of wheat, and
gress of the art of agriculture, as it has raised that of animal food.

256 THE NATURE AND CAUSES OF BOOK i.

animal food cannot much affect the circumstances of the inferior
ranks of people. The circumstances of the poor through a great
part of England cannot surely be so much distressed by any rise in
the price of poultry, fish, wild-fowl, or venison, as they must be
relieved by the fall in that of potatoes.

In the present season of scarcity the high price of corn no doubt
distresses the poor. But in times of moderate plenty, when corn
is at its ordinary or average price, the natural rise in the price
of any other sort of rude produce cannot much aifect them. They
suffer morQ, perhaps, by the artificial rise which has been occasioned
by taxes in the price of some manufactured commodities ; as of
salt, soap, leather, candles, malt, beer, and ale, &c.

Effects of the Progress of Improvement upon the real Price of

Manufactures.

It is the natural effect of improvement, however, to diminish
gradually the real price of almost all manufactures. That of the
manufacturing workmanship diminishes, perhaps, in all of them
without exception. In consequence of better machinery, of greater
dexterity, and of a more proper division and distribution of work,
all of which are the natural effects of improvement, a much smaller
quantity of labour becomes requisite for executing any particular
piece of work; and though, in consequence of the flourishing
circumstances of the society, the real price of labour should rise
very considerably, yet the great diminution of the quantity will
generally much more than compensate the greatest rise which can
happen in the price.

There are, indeed, a few manufactures in which the necessary
rise in the real price of the rude materials will more than compen-
sate all the advantages which improvement can introduce into the
execution of the work. In carpenters' and joiners' work, and in
the coarser sort of cabinet work, the necessary rise in the real
price of barren timber, in consequence of the improvement of land,
will more than compensate all the advantages which can be de-
rived from the best machinery, the greatest dexterity, and the most
proper division and distribution of work. 1

1 Mechanical appliances, in the form of of wood which is assigned to labour. But

machinery for cutting and shaping tim- the price of common timber, owing to

ber, are now inducing great economies increased facilities of transport, has not

on that part of the price of articles made materially risen for the last twenty years.

CHAP. xi. THE WEALTH OF NATIONS. 257

But in all cases in which the real price of the rude materials
either does not rise at all or does not rise very much, that of
the manufactured commodity sinks very considerably.

This diminution of price has, in the course of the present and
preceding century, been most remarkable in those manufactures
of which the materials are the coarser metals. A better move-
ment of a watch, than about the middle of the last century could
have been bought for twenty pounds, may now perhaps be had
for twenty shillings. In the work of cutlers and locksmiths, in
all the toys which are made of the coarser metals, and in all
those goods which are commonly known by the name of Bir-
mingham and Sheffield ware, there has been, during the same
period, a very great reduction of price, though not altogether so
great as in watchwqrk. It has, however, been sufficient to astonish
the workmen of every other part of Europe, who in many cases
acknowledge that they can produce no work of equal goodness
for double or even for triple the price. There are perhaps no manu-
factures in which the division of labour can be carried further, or
in which the machinery employed admits of a greater variety of
improvements, than those of which the materials are the coarser
metals. 1

In the clothing manufacture there has, during the same period,
been no such sensible reduction of price. The price of superfine
cloth, I have been assured, on the contrary, has, within these
five-and-twenty or thirty years, risen somewhat in proportion to
its quality; owing, it was said, to a considerable rise in the price
of the material, which consists altogether of Spanish wool. That
of the Yorkshire cloth, which is made altogether of English wool,
is said indeed, during the course of the present century, to have
fallen a good deal in proportion to its quality. Quality, however,
is so very disputable a matter, that I look upon all information
of this kind as somewhat uncertain. In the clothing manufacture,
the division of labour is nearly the same now as it was a century
ago, and the machinery employed is not very different. There
may, however, have been some small improvements in both, which
may have occasioned some reduction of price. 2

1 The cheapening of these articles has 2 Here, again, economies similar to

been effected in a still more remarkable those which have been adopted in the

degree since the time in which Smith manufacture of vegetable fibres have

wrote. materially lessened the price of cloth.

VOL. I. S

258 THE NATURE AND CAUSES OF BOOK i.

But the reduction will appear much more sensible and undeniable,
if we compare the price of this manufacture in the present times
with what it was in a much remoter period, towards the end of
the fifteenth century, when the labour was probably much less
subdivided, and the machinery employed much more imperfect
than it is at present.

In 1487, being the fourth of Henry VII, it was enacted that
* whosoever shall sell by retail a broad yard of the finest scarlet
grained, or of other grained cloth of the finest making, above
sixteen shillings, shall forfeit forty shillings for every yard so sold. 5
Sixteen shillings, therefore, containing about the same quantity
of silver as four-and-twenty shillings of our present money, was,
at that time, reckoned not an unreasonable price for a yard of
the finest cloth; and as this is a sumptuary law, such cloth, it
is probable, had usually been sold somewhat dearer. A guinea
may be reckoned the highest price in the present times. Even
though the quality of the cloths, therefore, should be supposed equal,
and that of the present times is most probably much superior, yet
even upon this supposition, the money price of the finest cloth
appears to have been considerably reduced since the end of the
fifteenth century. But its real price has been much more re-
duced. Six shillings and eightpence was then, and long after-
wards, reckoned the average price of a quarter of wheat. Sixteen
shillings, therefore, was the price of two quarters and more than
three bushels of wheat. Valuing a quarter of wheat in the present
times at eight-and-twenty shillings, the real price of a yard of
fine cloth must, in those times, have been equal to at least three
pounds six shillings and sixpence of our present money. The man
who bought it must have parted with the command of a quantity
of labour and subsistence equal to what that sum would purchase
in the present times.

The reduction in the real price of the coarse manufacture, though
considerable, has not been so great as in that of the fine.

In 1463, being the 3rd of Edward IV, it was enacted that
'no servant in husbandry, nor common labourer, nor servant to
any artificer inhabiting out of a city or burgh, shall use or wear
in their clothing any cloth above two shillings the broad yard/
In the 3rd of Edward IV two shillings contained very nearly the
same quantity of silver as four of our present money. But the

CHAP. XT. THE WEALTH OF NATIONS. 259

Yorkshire cloth which is now sold at four shillings the. yard, 'is
probably much superior to any that was then made for the wearing
of the very poorest order of common servants. Even the money
price of their clothing, therefore, may, in proportion to the quality,
be somewhat cheaper in the present than it was in those ancient
times. The real price is certainly a good deal cheaper. Tenpence
was then reckoned what is called the moderate and reasonable
price of a bushel of wheat. Two shillings, therefore, was the
price of two bushels and near two pecks of wheat, which, in the
present times, at three shillings and sixpence the bushel, would
be worth eight shillings and ninepence. For a yard of this cloth
the poor servant must have parted with the power of purchasing
a quantity of subsistence equal to what eight shillings and nine-
pence would purchase in the present times. This is a sumptuary
law too, restraining the luxury and extravagance of the poor. Their
clothing, therefore, had commonly been much more expensive.

The same order of people arc, by the same law, prohibited from
wearing hose, of which the price should exceed fourteenpence the
pair, equal to about eight-and-twenty pence of our present money.
But fourteenpence was in those times the price of a bushel and
near two pecks of wheat ; which, in the present times, at three and
sixpence the bushel, would cost live shillings and threepence. We
should in the present times consider this as a very high price for
a pair of stockings to a servant of the poorest and lowest order.
He must, however, in those times have paid what was really
equivalent to this price for them.

In the time of Edward IV the art of knitting stockings was
probably not known in any part of Europe. Their hose were
made of common cloth, which may have been one of the causes
of their dearness. The first person that wore stockings in England
is said to have been Queen Elizabeth. 1 She received them as a
present from the Spanish ambassador.

Both in the coarse and in the fine woollen manufacture, the
machinery employed was much more imperfect in those ancient,
than it is in the present times. It has since received three very
capital improvements, besides, probably, many smaller ones of which

1 The story is that this Queen was the College in Oxford possesses the relioa

first person who had knitted silk stock- of such a pair, which belonged to their

ings. Knitted silk gloves were known founder, William of Wykeham.
in the fourteenth century, for New

6 2

260 THE NATURE AND CAUSES OF BOOK i.

it may be difficult to ascertain either the number or the importance.
The three capital improvements are; first, the exchange of the
rock and spindle for the spinning-wheel, which, with the same
quantity of labour, will perform more than double the quantity
of work. Secondly, the use of several very ingenious machines
which facilitate and abridge in a still greater proportion the wind-
ing of the worsted and woollen yarn, or the proper arrangement
of the warp and woof before they are put into the loom ; an opera-
tion which, previous to the invention of those machines, must have
been extremely tedious and troublesome. Thirdly, the employment
of the fulling mill for thickening the cloth, instead of treading
it in water. Neither wind nor water mills of any kind were known
in England so early as the beginning of the sixteenth century,
nor, so far as I know, in any other part of Europe north of the
Alps. 1 They had been introduced into Italy some time before.

The consideration of these circumstances may, perhaps, in some
measure explain to us why the real price both of the coarse and
of the fine manufacture was so much higher in those ancient,
than it is in the present times. It cost a greater quantity of
labour to bring the goods to market. When they were brought
thither, therefore, they must have purchased or exchanged for the
price of a greater quantity.

The coarse manufacture probably was, in those ancient times,
carried on in England, in the same manner as it always has been
in countries where arts and manufactures are in their infancy, 2
It was probably a household manufacture, in which every different
part of the work was occasionally performed by all the different
members of almost every private family ; but so as to be their
work only when they had nothing else to do, and not to be the
principal business from which any of them derived the greater part
of their subsistence. The work which is performed in this manner,
it has already been observed, comes always much cheaper to market
than that which is the principal or sole fund of the workman's
subsistence. The fine manufacture, on the other hand, was not

1 Both wind and water mills were very 2 The woollen manufactures of Eng-

common in England as early at least as land were carried on extensively in Nor-

the thirteenth century. Nor was the folk, Westmoreland, and generally in the

fulling mill unknown. The Editor has southern counties. Of this there is abun-

seen an account of the annual rent of dant evidence. See the Editor's Agri-

a fulling mill at Cuxhain in Oxfordshire culture and Prices,
for the first half of the fourteenth century.

CHAP. xi. THE WEALTH OF NATIONS. 261

in those times carried on in England, but in the rich and com-
mercial country of Flanders ; and it was probably conducted then,
in the same manner as now, by people who derived the whole,
or the principal part of their subsistence from it. It was besides
a foreign manufacture, and must have paid some duty, the ancient
custom of tonnage and poundage at least, to the king. This duty,
indeed, would not probably be very great. It was not then the
policy of Europe to restrain, by high duties, the importation of
foreign manufactures, but rather to encourage it, in order that
merchants might be enabled to supply, at as easy a rate as
possible, the great men with the conveniences and luxuries which
they wanted, and which the industry of their own country could
not afford them.

The consideration of these circumstances may perhaps in some
measure explain to us why, in those ancient times, the real price of
the coarse manufacture was, in proportion to that of the fine, so
much lower than in the present times.

CONCLUSION OF THE CHAPTER.

I SHALL conclude this very long chapter with observing that every
improvement in the circumstances of the society tends either directly
or indirectly to raise the real rent of land, to increase the real wealth
of the landlord, his power of purchasing the labour, or the produce
of the labour of other people.

The extension of improvement and cultivation tends to raise it
directly. The landlord's share of the produce necessarily increases
with the increase of the produce.

That rise in the real price of those parts of the rude produce of
land, which is first the effect of extended improvement and cultiva-
tion, and afterwards the cause of their being still further extended,
the rise in the price of cattle for example, tends too to raise the
rent of land directly, and in a still greater pi-oportion. The real
value of the landlord's share, his real command of the labour of
other people, not only rises with the real value of the produce, but
the proportion of his share to the whole produce rises with it. That
produce, after the rise in its real price, requires no more labour to
collect it than before. A smaller proportion of it will, therefore, be
sufficient to replace, with the ordinary profit, the stock which

262 THE NATURE AND CAUSES OF BOOK i.

employs that labour, A greater proportion of it must, con-
sequently, belong to the landlord.

All those improvements in the productive powers of labour, which
tend directly to reduce the real price of manufactures, tend indirectly
to raise the real rent of land. The landlord exchanges that part of
his rude produce, which is over and above his own consumption, or
what comes to the same thing, the price of that part of it, for
manufactured produce. Whatever reduces the real price of the
latter, raises that of the former. An equal quantity of the former
becomes thereby equivalent to a greater quantity of the latter ; and
the landlord is enabled to purchase a greater quantity of the con-
veniences, ornaments, or luxuries which he has occasion for. 1

Every increase in the real wealth of the society, every increase in
the quantity of useful labour employed within it, tends indirectly to
raise the real rent of land. A certain proportion of this labour
naturally goes to the land. A greater number of men and cattle
are employed in its cultivation, the produce increases with the
increase of the stock, which is thus employed in raising it, and the
rent increases with the produce.

The contrary circumstances, the neglect of cultivation and im-
provement, the fall in the real price of any part of the rude produce
of land, the rise in the real price of manufactures from the decay of
manufacturing art and industry, the declension of the real wealth of
the society, all tend, on the other hand, to lower the real rent of land,
to reduce the real wealth of the landlord, to diminish his power of pur-
chasing either the labour or the produce of the labour of other people.

The whole annual produce of the land and labour of every country,
or what comes to the same thing, the whole price of that annual pro-
duce, naturally divides itself, it has already been observed, into three
parts ; the rent of land, the wages of labour, and the profits of stock ;
and constitutes a revenue to three different orders of people; to those
who live by rent, to those who live by wages, and to those who live
by profit. These are the three great original and constituent orders
of every civilised society, from whose revenue that of every other
order is ultimately derived.

1 Everybody is benefited by an im- measured in money, has larger powers

provement in the productive powers of of purchase, and his rent itself tends to

labour, and, unless population increases increase, by the competition for land,

excessively, labourers most. But the and for the secondary necessaries of life

landowner is most benefited. His rent, produced from land.

CHAP. xi. THE WEALTH OF NATIONS. 263

The interest of the first of those three great orders, it appears from
what has been just now said, is strictly and inseparably connected
with the general interest of the society. Whatever either promotes
or obstructs the one, necessarily promotes or obstructs the other.
When the public deliberates concerning any regulation of commerce
or police, the proprietors of land never can mislead it, with a view
to promote the interest of their own particular order; at least,
if they have any tolerable knowledge of that interest. They are,
indeed, too often defective in this tolerable knowledge. They are
the only one of the three orders whose revenue costs them neither
labour nor care, but comes to them, as it were, of its own accord, and
independent of any plan or project of their own. That indolence,
which is the natural effect of the ease and security of their situa-
tion, renders them too often, not only ignorant, but incapable of
that application of mind which is necessary in order to foresee and
understand the consequences of any public regulation.

The interest of the second order, that of those who live by wages,
is as strictly connected with the interest of the society as that of the
first. The wages of the labourer, it has already been shown, are
never so high as when the demand for labour is continually rising,
or when the quantity employed is every year increasing considerably.
When this real wealth of the society becomes stationary, his wages
are soon reduced to what is barely enough to enable him to bring
up a family, or to continue the race of labourers. When the society
declines, they Ml even below this. The order of proprietors may,
perhaps, gain more by the prosperity of the society than that of
labourers : but there is no order that suffers so cruelly from its de-
cline. But though the interest of the labourer is strictly connected
with that of the society, he is incapable either of comprehending
that interest, or of understanding its connexion with his own. His
condition leaves him no time to receive the necessary information, and
his education and habits are commonly such as to render him unfit to
judge even though he was fully informed. In the public deliberations,
therefore, his voice is little heard and less regarded, except upon some
particular occasions, when his clamour is animated, set on, and sup-
ported by his employers, not for his, but their own particular purposes.

His employers constitute the third order, that of those who live
by profit. It is the stock that is employed for the sake of profit,
which puts into motion the greater part of the useful labour of

264 THE NATURE AND CAUSES OF BOOK i.

every society. The plans and projects of the employers of stock
regulate and direct all the most important operations of labour, and
profit is the end proposed by all those plans and projects. But the
rate of profit does not, like rent and wages, rise with the prosperity
and fall with the declension of the society. On the contrary, it is
naturally low in rich, and high in poor countries, and it is always
highest in the countries which are going fastest to ruin. 1 The
interest of this third order, therefore, has not the same connexion
with the general interest of the society as that of the other two.
Merchants and master manufacturers are, in this order, the two
classes of people who commonly employ the largest capitals, and
who by their wealth draw to themselves the greatest share of the
public consideration. As during their whole lives they are engaged
in plans and projects, they have frequently more acuteness of under-
standing than the greater part of country gentlemen. As their
thoughts, however, are commonly exercised rather about the in-
terest of their own particular branch of business, than about that
of the society, their judgment, even when given with the greatest
candour (which it has not been upon every occasion), is much more
to be depended upon with regard to the former of those two objects,
than with regard to the latter. Their superiority over the country
gentleman is, not so much in their knowledge of the public interest,
as in their having a better knowledge of their own interest than he
has of his. It is by this superior knowledge of their own interest
that they have frequently imposed upon his generosity, and per-
suaded him to give up both his own interest and that of the public,
from a very simple but honest conviction, that their interest, and
not his, was the interest of the public. The interest of the dealers,
however, in any particular branch of trade or manufactures, is
always in some respects different from, and even opposite to, that
of the public. . To widen the market and to narrow the competition
is always the interest of the dealers. To widen the market may
frequently be agreeable enough to the interest of the public ; but to

1 This statement is exceedingly in- which belong to great natural fertility,

accurate. Adam Smith seems to have The highest rate of profit, as Smith

confounded high rates of interest, due admits subsequently, is exhibited in new

to inadequate security, with high rates colonies, the condition of which is eini*

of profit, due to the fact that the natural nently favourable to progressive wealth,

rebources of a country are high, its labour This passage, again, is one in wliich

unequal to the demand, and its capital, Smith is warped by the reasonings of

though abundantly remunerated, insuffi- the Economists,
cient to appropriate all the advantages

CHAP. XI,

THE WEALTH OF NATIONS.

265

narrow the competition must always be against it, and can serve
only to enable the dealers, by raising their profits above what they
naturally would be, to levy, for their own benefit, an absurd tax
upon the rest of their fellow-citizens. The proposal of any new
law or regulation of commerce which comes from this order ought
always to be listened to with great precaution, and ought never to
be adopted till after having been long and carefully examined, not
only with the most scrupulous, but with the most suspicious atten-
tion. It comes from an order of men whose interest is never exactly
the same with that of the public, who have generally an interest to
deceive and even to oppress the public, and who accordingly have,
upon many occasions, both deceived and oppressed it.*

* Years
XII.

Price of the
Quarter of
Wheat each
Y'ear.

Average of
the different
Prices of the
bame Year.

The average
Price of each
Year in
Money of the
present
Times.

Years
XII.

Price of the
Quarter of
Wheat each
Year.

Average of
the diilerent
Prices of the
same Year.

The average
Price of each
\Tear in
Money of the
present
Times.

s. d.

8. d.

8. d.

8. d.

8. d.

8. d.

I2O2

O 12 O

.

i 16 o

1287

034

.

10

( 12 )

fo o 8

1205

jo 13 4[

13 5

2 o 3

O I O

(015 o )

014

1223

12
034

i 16 o

O IO

1288

l ^ i

1 -~ T Q 1

O I O i

o 3 oj

o 9 o|

H43

O 2 O

060

2 O

1244

O 2 O

060

034

1246

l6

280

LO 9 4)

1247

o 13 4

200

O 12 Ol

1257

140

3 12

1 o 6 o 1

( I 0)

1289

4 2 1

O IO l|

i 10 4!

I2 5 8

< o 15 o V
( o 16 o )

o 17 o

2 II O

1 o 10 8 |
LI o oj

1270

(4 16 o
(6 8 o|

5 12 o

16 16 o

1290
I2 94

o 16 o
0160

280
280

1286

(o 2 8i

( o 16 o 'i

094

i 8 o

1302
1309

040
072

I O O

12 O

i i 6
30 o

Total 35 9 3

*

fi o <T)
i 10 o !

1 i 12 or

i 10 6

w \J

4 ii 6

Average Price

2 19 i

L2 )

p 4 o-l

1 o 14 o

1317

O 13 o \

i 19 6

5 '8 6

400

LO 6 8J

1336

020

..

060

1338

034

..

O IO O

Total 23 4 n\

Average Price

i 18 8

266

THE NATURE AND CAUSES OF

BOOK I.

Years

Price of the
Quarter of

Average of
the different

The average
Price of each
Year in

Yeara

Price of the
Quarter of

Average of
the ditr-rent

The average
Price of each
Year in

XII.

Wheat each
Year.

Prices of the
same Year,

Money of the
present

XII.

Wheat each
Year.

Prices of the
same Year.

Money of the
present

Times.

Times.

s. d.

s. d.

8. d.

8. d.

s. d.

8. d.

1339

090

. .

i 7 o

H 2 3

080

o 16 o

X 349

O 2 O

052

M25

040

..

080

*359

i 6 8

. .

3 2 2

'434

i 6 8

.

2 T 3 4

1361

020

..

048

H35

054

. .

o 10 8

1363
1369

o 15 o

(I 0)

M 4 of

I 2 O

i 15 o

294

U39
1440

J I 0)

ji 6 8{
i 4 o

i 3 4

2 6 8
280

J 379
138?

040

020

094
048

1444

j 4 4?
( 4 o)

4 2

084

( J 3 4)

1445

046

. . .

090

139

jo 14 o[

o M 5

i 13 7

M47

080

o 16 o

( o 16 o )

1448

068

.

o 13 4

1401

0160

i 17 4

1449

050

. .

10

1407

5 4 4?l

1 141

o 3 10

o 8 11

M5 1

080

..

0160

1416

o 16 o

.. ..

I 12

Total 12 15 4

Total 15 9 4

Average Price i i 3^

Average Price

*i 5 9

Price of the

Average of

The average
Price of each '

Years

Quarter of

the different

Year in

XII.

Wheat each

Prices of the

Money of the

Year.

same Year.

present

Times.

8. d.

S. d.

s. d.

M53

5 4

. .

o 10 8

T 455

O I 2

..

o 2 4

M57

078

..

15 4

1459

050

.

O IO O

1460

080

o 16 o

1463

(020)

jo i 8(

O I IO

038

1464

068

.

O IO

1486

i 4 o

i 17 o

1491

o 14 8

. . . .

120

1494

040

..

060

M95

034

050

H97

100

I II

Total 890

Average Price o 14 i

CHAP. XI.

THE WEALTH OF NATIONS.

267

The average

The average

Price of the

Average of

Price of each

Price of the

Average of

Price of each

Years

Quarter of

the different

Year in

Years

Quarter of

the different

Year in

XII.

Wheat each

Prices of the

Money of the

XII.

Wheat each

Prices of the

Money oi the

Year.

same Year.

present

Year.

same Year.

present

Times.

Tunes.

s. d.

8. d.

8. d.

8. d.

8. d.

8. d.

1499

040

..

060

i56r

080

080

J 54

058

. .

086

1562

080

..

080

1521

100

I IO O

S2 l6 O ) i

080

2 O

1574

I40J 2

200

J 553

080

.

080

15*7

340|.. '

340

1554

080

. .

080

2 l6 O

. . .

2 l6 O

1555

080

..

O8o

J 595

2 13

. .

2 13

1556

080

O8o

1596

4OO ....

400

!o 4 o \

45 4 o ) !

* T ~ /

I KQ7

< D * \ , & 12

4 12 O

o c; of

/ <i O O \

i

w

1557

*/ \
o 8 of

o 17 8J

o 17 8|

I 59 8

v T- w w ;
2 16 8

2 16 8

2 13 4;

1599

1 19 2

.

I 19 2

1558

080

. .

080

I60O

i 17 8

.

i 17 8

1559

080

.*

080

1601

i 14 10

. .

i 14 10

i ^60

n K n

080

Total 28 9 4

Total ^ rt *

2

Average Price 2 7 5^

Average Price o 10 o~

268

THE NATURE AND CAUSES OF

BOOK I.

Prices of the Quarter of nine Bushels of the best or highest priced Wheat at Windsor
Market on Lady-day and Michaelmas, from 1595 to 1764, both inclusive; the Price
of each Year being the Medium between the highest Prices of those two Market Days.

Wheat
per
quarter.

Wheat
per
quarter.

Wheat
per
quarter.

Wheat
per
quarter.

Wheat
per
quarter.

Years.

8. d.

Years.

s. d.

Years.

s. d.

Years.

S. d.

Years.

S. d.

*595

40 o

1629

42

l66 3

57 o

1697

60 o

1731

32 10

I59<5

48 o

1630

55 8

1664

40 6

1698

68 4

1732

26 8

1597

69 6

1631

68 o

l66 5

49 4

1699

64 o

1733

28 4

1598

5<5 8

1632

53 4

1666

3 6 o

1700

40 o

1734

38 10

J 599

39 2

1633

58 o

l66 7

36 o

1701

37 8

1/35

43 o

1600

37 8

1634

56 o

1668

40 o

1702

29 6

1736

40 4

1601

U i

1635

56 o

1669

44 4

I73

36 o

1737

38 o

1602

29 4

1636

56 8

1670

41 8

1704

4 6 6

I73S

35 6

1603

35 4

1637

53 o

1671

42 o

i75

30 o

1739

38 6

1604

30 8

1638

57 4

1672

41 o

1706

26 o

1740

50 8

1605

35 10

1639

44 10

1673

46 8

1707

28 6

1741

46 8

1606

33 o

1640

44 8

1674

68 8

1708

41 6

1742

34

1607

36 S

1641

48 o

I 6 75

64 8

1709

78 6

1743

24 10

1608

56 8

1642*

l6 7 6

38 o

1710

78 o

1744

24 10

1609

50 o

1643*

1677

42 o

1711

54 o

1745

27 6

1610

35 1

1641*

1678

59 o

1712

46 4

1746

39

1611

38 8

1645*

O

1679

60 o

i7 J 3

51 o

1747

34 I0

1612

42 4

1646

48 o

l68o

45 o

i7H

5 4

1748

37 o

1613

48 8

1647

73 8

1681

46 8

17*5

43 o

1749

37 o

1614

41 8}

1648

85 o

1682

44 o

1716

48 o

1750

32 6

1615

38 8

1649

80 o

1683

40 o

t7 J 7

45 8

1751

38 6

1616

40 4

1650

76 8

1684

44 o

1718

38 10

1752

41 10

1617

48 8

1651

73 4

1685

46 8

1719

35 o

1753

44 8

1618

46 8

1652

49 6

1686

34

1720

37 o

1754

34 8

1619

35 4

1653

35 6

1687

25 2

1721

37 6

1755

33 I0

1620

30 4

1654

26 o

1688

46 o

1722

36 o

1756

45 3

1621

30 4

l6 55

33 4

1689

30 o

1723

34 8

1757

60 o

1622

58 8

1656

43 o

1690

34 8

1724

37 o

1758

50 o

1623
1624

52 o
58 o

1657
1658

46 8
65 o

1691
1692

34
46 8

1725
1726

48 6
46 o

1759
1700

39 i
3<> 6

1625

32 o

1659

66 o

I 6 93

67 8

1727

42 o

1761

3 3

1626

49 4

1660

56 6

1694

64 o

1728

54 6

1762

39

1627

36 o

1661

70 o

1695

53 o

1729

46 10

1763

40 9

1628

28 o

1662

74 o

1696

71 o

1730

36 6

1764

46 9

136)322 15 2

2 7 5z

Wheat

Wheat

Wheat

Wheat

per

per

per

per

quarter.

quarter.

quarter.

quarter.

Years.

S. d.

Years.

8. d.

Years.

8. d.

Years.

S. d.

I73i

32 10

1736

40 4

1741

46 8

1746

39

1732

26 8

1737

38 o

1742

34 o

1747

34 10

1733

28 4

1738

35 6

1743

24 10

1748

37 o

1734

38 10

1739

38 6

*744

24 10

1749

37 o

i?35

43 o

1740

50 8

1745

27 6

1/50

32 6

10)18 12 8

10)16 18 2

1 J 7 3i

i '3 9*

* Wanting in the account. The year 1646 supplied by Bishop Fleetwood.

CHAP. XI.

THE WEALTH OF NATIONS.

269

The following table of Oxford wheat prices is taken from Mr. Lloyd's collection, obtained
from the register of the clerks of the Oxford Market. The prices are an average of
the Michaelmas and Lady-Day returns. The first year is obtained from the New College
roll. The years marked * are lost in the Oxford accounts, and are supplied from Eton.
The quarter is of eiyht bushels.

Vheat per
quarter.

Vheat per
quarter.

Wheat per
quarter.

Wheat per
quarter.

Wheat per
quarter.

Years.

s. d.

Years,

s. d.

Years.

s. d.

Years.

s. d.

Years.

S. d.

1582

18 2

1632

4* 4?

1682

35 3

1731

24 o

1780

40 o

1583

i? 4

1633

43 io|

1683

35 3

1732

22 2\

1781

53 4

1584

IS 8J

I 6 34

43 3

1684

36 8]

1733

23 2

1782

55 o

1585

21 0^

1^35

42 i

1685

36 9*

!?34

30 2|

T 7 8 3

58 8

I 5 86

32 o

1636

43 10

1686

26 8

1735

35 6 i

1784

60 5

1587

27 10

1637

43 32

1687

28 7

1736

37 4i

i7 8 5

48 5

1588

H 4

1638

47 *2

1688

23 *i

1737

35 8

1786

41 10

1589

19 6

1639

35 7

1689

28 2

1738

27 ii

1787

49 9

J 59

23 i

1640

36 2

1690

29 4

!?39

3i 8

1788

49 4

*59i

2O 2

164!

40 32

1691

29 ii

1740

47 10

1789

53 92?

1592

16 7

1642

33 9z

1692

39 8|

1741

43 3i

1790

57 9s

T 593

18 4 J

i<>43

40 3|

1693

5 6 32

1742

28 5!

1791

5i ioi

*594

^2 C

1644

33 2

1694

50 112

J 743

21 Oj

!?93

49 9

J 595

38 6

1645

38 7

1695

43 10

J 744

21 7J

*i794

54 o

1596

46 3,

1646

45 74

1696

47 i

X 745

21 II

!795

77 4

J 597

5<> 102-

1647

53 i

1697

53 10

1746

30 6

1796

81 8

1598

37 1}

1648

59 3

1698

58 i

!?47

30 6

J 797

64 io

J 599

23 8*

1649

62 7j

1699

5^> 3i

1748

29 4

1798

56 ii

1600

29 o

1650

54 6

1700

34 4i

! 749

29 ii

1799

88 ii

1601

26 8

1651

49 5j

1701

28 5i

1 7~> Q

28 S

1800

"S 6

1602

2 4 32

1652

38 10

1702

24 7*

J75 1

32 io|

1801

133 10

1603

26 8

1653

26 i

1703

28 5

1752

35 7

1802

6 9 32

1604

24 i3i

1654

19 10

1704

35 64

1753

37 92

T 803

S / 1,
67 9

1605

26 o|

* 6 55

27 10

1705

^7 o|-

1754

.32 2

1804

92 o

1606

25 52

1656

35 7

1706

22 6

1755

29 n|

1805

106 8

1607

29 oj

1657

38 10

1707

23 1

1756

38 2|

l8o6

84 5

1608

44 52

1658

51 7 T

1708

32 10]

1757

60 s|

ISO?

85 ii

1609

40 4

1659

53 o]

1709

66 4 J

1758

47 2 |

l8o8

90 6

1610

2? 3

1660

46 92

1710

66 4 i

1759

34 8

1809

ii5 5

1611

30 3

1661

55 *

1711

45 7i

1760

29 7|

1810

118 2|

1612

3 6 9

1662

62 9!

1712

38 6

1761

24 si

1811

na o

1613

39 2i

1663

43 3?

1713

40 7

1762

29 n

1812

137 92

1614

39 12

1661

42 o

1714

43 10

1763

33 J i

1813

123 o

1615

34 ij

1665

38 3l

171^

35 10

1764

40 o

1814

90 6

1616

34 n?

1666

29 oi

1716

42 4*

1765

4^> 3

1815

75 o

1617

39 8*

1667

29 84

1717

37 4

1766

40 ii

1816

83 6

1618

37 I5i

1668

33 3}

1718

3i i

1767

63 5

1817

126 o

1619

30 o

1669

38 6

1719

30 10

1768

57 i|

1818

100

1620

26 42

1670

34 IJ 2

1720

28 5

1769

44 5

1819

85 o

1621

25 9?

1671

34 1

1721

29 7

1770

49 9

1820

73 o

1622

47 i

1672

36 2

1722

29 i

*i?7i

50 8

1821

78 o

1623

45 72

1^73

43

'723

28 5

1772

56 ii

1822

60 o

1624

38 6j

1674

61 10

1724

30 2^

1773

57 4

1823

61 o

1625

41 2

1675

45 2

1725

37 9*

1774

63 2|

1824

70 o

1626

39 5

1676

29 ]

1726

42 8

i775

57 9?

1825

79 o

1627

30 6

1677

35 3

1727

3^ 9

1776

37 4

1826

63 6

1628

25 5i

1678

47 8J

1728

5 oJ

1777

49 9l

1827

61 o

1629

34 8

1679

44 9

1729

46 i

1778

49 9

1828

82 3

1630

46 a}

1680

35 3s

!73o

3i 5

1779

34 8

1829

82 o

1631

52 '

1681

39 i

270

THE NATURE AND CAUSES OF

BOOK I.

The following table is taken from the Board of Trade Returns, being the average price
of the imperial quarter of wheat during the years 1830-1879 inclusive.

Wheat

Wheat

Wheat

Wheat

Wheat

per

per

per

per

per

quarter.

quarter.

quarter.

quarter.

quarter.

Yeais.

8. d.

Years.

8. d.

Years.

8. d.

Years.

S. d.

Years.

8. d.

1830

69 3

1840

66 4

1850

40 3

1860

53 3

1869

48 2

1831

66 4

1841

64 4

1851

38 6

1861

55 4

1870

46 10

1832

58 8

1842

57 3

1852

40 9

1862

55 5

1871

56 8

1833

52 ii

1843

50 i

1853

53 3

1863

44 9

1872

57 o

1834

46 5

1844

5i 3

1854

72 5

1864

40 2

1873

58 8

*835

39 4

1845

50 10

1855

74 9

1865

4! TO

1874

55 8

1836
1837

48 6
55 10

1846
1847

54 8
69 9

1856
1857

69 2

56 5

i860
1867

4O II

64 5

1876
1877

46 2

56 9

1838

64 7

1848

50 6

1858

44 3

1868

^3 9

1879

46 5

1839

70 8

1849

44 3

1859

43 . 9

It will be plain to every one that the
prices of wheat which Smith gives de-
rived almost entirely from Fleetwood
are wholly untrustworthy. I have there-
fore appended a table, from 1259 to 1582.
The table is ono of averages, taken from
sales or purchases at all times of tho year,
and from all parts of the country. Since
1582, under the statute 18 Elizabeth,
cap. 6, half-yearly accounts of corn and
malt prices hav^ been regularly kept.

As the editor believes, for strong rea-
sons, that payments were made by weight
up to the time that Elizabeth reformed the
currency, he has not reduced the money
values from what are supposed to be their
nominal, to what are supposed to be their
real quantities.

If indeed, as seems to be clear from the
tables given below, the price of wheat was
not materially affected by the discovery

of the silver mines in America, and the
subsequent distribution of this metal
among the European currencies, there
appears to be only two ways in which the
facts can be explained. Either the value
of silver had risen in relation to other
commodities, and the new metal was
absorbed in quantities sufficiently large to
merely restore the equilibrium, or, as is
more probable, and as appeal s to be sug-
gested by recent phenomena, the internal
currency of a country, especially one where
foreign trade is small, is very little or very
slowly affected by the price of the pre-
cious metals in other countries. The dear
years of the reigns of Edward VI and Mary
Tudor, may be explained, and in fact must
be, by the bad money in circulation. For
the general impression that such must be
the explanation, see Latimer's Sermons.

These Wheat prices between 1259-1582, are ti&en from Me Editor's work on Agriculture
and Prices. It may be observed that they are all derived from contemporaneous
accounts of purchases and are generally averages from numerous sources.

Wheat

Wheat

Wheat

Wheat

Wheat

per

per

per

per

]>er

quarter.

quarter.

quarter.

quarter.

quarter.

Years.

s. d.

Years.

8. d.

Years.

8. d.

Years.

s. d.

Years.

8. d.

"59
1260

5 9*
4 9

1272
"73

6 4i
5 5;

1285
1286

5 4}
4 9

1298
1299

I 3'

13"
1312

4 5*
4 n

I26r

4 3

1274

6 9^

1287

2 IO|

1300

4 9

1313

5 6$

1262

6 i

1275

5 i

1288

S O-Z-

I30r

5 F

J 3H

8 4f

1263

3 nf

1276

6 2

1289

4 3-ff

1302

4 ll l

1315

14 io

1264

4 4

1277

5 i;

1290

6 5!

1303

4 U

1316

X 5 IJ< ff

1265

3 3 t

1278

4 4i

_

1291

5 7?

1304

5 97

J 3!7

8 3t

1266
1267
1268
1269

4 5f

4 5*
5 3f

1279
1280
1281
1282

5 I:

rs

5 "

1292

1293
1294

"95

8 H

9 *i
6 9

1305
1306
1307
1308

4 ioi
3 "I

Jl 6

6 II;

1318

13*9
1320
1321

5 9*
6 S

1270
1271

fig

1283
1284

6 ii
4 "i

1296
1297

5 !t

1309
1310

7 9;

7 o]

1322
1323

8 ii

7 5*

CHAP. XI.

THE WEALTH OF NATIONS.

271

Wheat

Wheat

Wheat

Wheat

Wheat

per

per

l>er

per

per

quarter.

quarter.

quarter

quarter.

quarter.

Yean.

. d.

Years.

8. d.

Yean.

a. d.

Years.

s. d.

Yean.

8 d.

1324

7 4f

1376

A Q

1428

8 IO|

1480

5 'o

1532

8

1325

1377

3 8$

1429

7 "

1481

8 6}

1533

7 8

I3*&

3 n

13/8

3 61

1430

5 "i

1482

10 4

1534

7 o

1327

3 II

1379

5 9f

4 8

1483

7 3l

'535

10 3|

I3 2 8

6 62

1380

M32

6 ii

1484

5 3|

1536

10 7}

1329

6 64

I38I

5 ?|

1433

5 i4

1485

4 61

'537

7 i

1330

7 2j

1382

1434

5 4

J 4 86

5 3;

1538

6 ii|

1331

1383

4 10

1435

5 6

148?

5 6J

!5.<9

5 7-

1332

4 8*

1384

5 7

1436

5 32

1488

5

1540

5 8}

1333

4 2Jj

1385

5 o

'437

9 3*

1489

5 i|

1541

9 f

1334

4 o?

1386

4 i

1438

1490

4 IO I

154^

7 "*

1335

5 35

1387

3 4*

1439

7 6 |

1491

o 7$

*543

9 2|

1336

4 ' *

1388

3 8

1440

3 I0 ?

1492

4 3

'544

O O; '

'3.17

3 7

1389

5 5"

1441

4 4

H93

4 i

1545

5 6|

1338

3 2f

I 39

8 9

1442

3 "*

1494

4 9?

1546

8 5

'339

5 104

W

5 5?

'443

4 2 ,

1495

4 o?

1547

4 ii

'34

3 62

1392

3 2*

1444

3 J M

1496

5 5i

1548

8 if

1341

3 9f

^393

3 81

I 445

6 3i

M97

5 i

J 549

16 4

1342

4 'v

1394 3 104

M46

5 "4

1498

5 5 l l

1550

18 o

'343

5 74*

'395 5 o.

H47

5 *,

J499

i 9 ,

155'

2 3 8J

1 344

3 6

1396

5 Hi

1448

5 7

1500

2 '

'55*

10 6|

1345

3 9?

1397

5 94

1449

5 3l

1501

8 5}

'553

10 o

I34 f>

6 io^

1398

5 24

1 45

6 6^

'

1502

8 o|

'554

18 8x

1347

6 75

1399

5 6ir

'45 1

6 6

J 5Q3

6 3l

1555

22 O^

1348

4 2

1400

7 Us

1452

5 8.

I

1504

5 oj

I 55'

28 u

1349

5 5*

1401

7 42

'453

5 J -

I 55

4 I0 4

1557

8 4 J

1350

8 3*

1402

6 8|

H54

2 lO'

1 '

f

1506

5 4l

1558

9 3?

1351

10 2J

1403

4 ny

1 455

5 5.

>

i

1 57

5 6|

1559

ii o|

1352

7 21

1404

4 o

14^6

4 IM

!

1508

3 10}

1560

14 2}

1354

4 *i
5 3+

I 4b
1406

3 9?
4 4,

'457
US 8

5 9,
5 95

>

ijjro

3 o
4 o^

1561
1562

15 8
10 ni

1355

c n2

/ n

1407

4 6|

M59

5 l ]

1

1511

5 8

1/563

19 9]

6 o

1408

7 3f

1460

*7 O"

1512

9 X 4

1564

10 10]

1357

6 IOJ:

1409

8 ni

1461

7 s!

1513

6 0}

1565

10 7

1358

5 <>2

1410

4 104

1462

4 4<

T 5 1 4

4 8

1566

16 5}

1359

5 ii

1411

4 10

1463

3 7,

1515

6 9!

'567

ii i

1360

6 ai

1412

4 10?

1464

4 J

5

1516

5 3j

1568

ii 3\

136'

5 4?

I4 X 3

4 3;

14*15

4 7

151 7

6 5

1569

ii 9^

1362

7 6

1414

4 3:

1466

5 4

1518

5 "|

1570

9 10

1363

3 6

1415

6 3*

146?

5 4

J 5*9

7 2

I57 1

12 5*

1364

7 511

1416

7 ":

1468

5 ?|

1520

9 4i

1572

^ M

1365

6 o

1417

5 3;

1469

6 5

i

J 5 21

7 84

'573

26 3-

1366

6 8}

1418

6 n r

1470

S 9

1522

6 0}

1574

14 2|

1367

8 7

1419

4 Jo;

1471

5 7

1523

5 6

1575

J5 "

1368

6 7^

1420

6 3

1472

4 o

J

1524

5 i|

1576

22 2\

1369

ii ioj

1421

5 2|

'473

3 10

1525

5 4,

1577

JO 2

9 4*

1422

4 4

H74

4 6

1526

6 2|

^

'578

16 ii

I37i

6 n;

1423

4 5)

1475

5 54

5-7

X 3 7J

1579

13 if

1372

7 I0 )

1424

1476

- T '

1528

9 5j'

1580

16 g\

1373

6 2;

1425

4 w

H77

6 8

1529

9 8

1581

16 2\

1374

8 2=

1426

3 "I

1478

6 7

1

1530

7 *

1582

18 8|

1375

7 9*

1427

4 4

H79

5 10

?

1531

8 2}

272

THE NATURE AND CAUSES, ETC.

BOOK I.

DECENNIAL AVERAGES.

Years.

s. d.

Years.

s. d.

Years.

s. d.

1261-70

4 84

1371-80

6 ij

1481-90

6 3?

1771-80

5 ?!

1381^90

5 2

1491-1500

5 o|

1281-90

5 o

1391-1400

5 3

1501-10

5 5k

1291-1300

6 *?

1401-10

5 8|

1511-20

6 7 |

1301-10

5 7?

1411-20

5 72

1521-30

7 7

I3H-20

7 ioi

1421-30

5 4*

I53I-4

7 8

1321-30

6 ii|

1431-40

6 ii

1541-50

n 7^

1331-40

4 8

1441-50

5 J |

1551-60

i5 7

i34 r -50

5 3*

1451-60

5 6|

1561-70

12 lo|

1351-60

6 ia*

1461-70

5 3j

1571-80

17 3*

1361-70

.1

7 3*

1471-80

5 4*

BOOK IL

OF THE NATURE, ACCUMULATION, AND EMPLOYMENT OF STOCK.

INTRODUCTION.

TN that rude state of society in which there is no division of
-*- labour, in which exchanges are seldom made, and in which
every man provides everything for himself, it is not necessary that
any stock should be accumulated or stored up beforehand in order
to carry on the business of the society. Every man endeavours to
supply by his own industry his occasional wants as they occur.
When he is hungry, he goes to the forest to hunt ; when his coat
is worn, he clothes himself with the skin of the first large animal
he kills ; and when his hut begins to go to ruin, he repairs it, as
well as he can, with the trees and turf that are nearest it.

But when the division of labour has once been thoroughly intro-
duced, the produce of a man's own labour can supply but a very
small part of his occasional wants. The far greater part of them
are supplied by the produce of other men's labour, which he pur-
chases with the produce, or, what is the same thing, with the price
of the produce of his own. But this purchase cannot be made till
such time as the produce of his own labour has not only been com-
pleted, but sold. A stock of goods of different kinds, therefore,
must be stored up somewhere sufficient to maintain him, and to
supply him with the materials and tools of his own work till such
time, at least, as both these events can be brought about. A
weaver cannot apply himself entirely to his peculiar business, unless
there is beforehand stored up somewhere, either in his own posses-
sion or in that of some other person, a stock sufficient to maintain
him, and to supply him with the materials and tools of his work,
till he has not only completed, but sold his web. This accumulation
must, evidently, be previous to his applying his industry for so long
a time to such a peculiar business. 1

1 There is no condition of human life some stock of provisions. He must, in
in which some capital is not stored up. order to perpetuate his race, maintain
The rudest savage has his weapons, and his children in infancy. We cannot, in

VOL. I. T

274 THE NATURE AND CAUSES OF INTRO-

As the accumulation of stock must, in the nature of things, be
previous to the division of labour, so labour can be more and more
subdivided in proportion only as stock is previously more and more
accumulated. The quantity of materials which the same number of
people can work up, increases in a great proportion as labour comes
to be more and more subdivided ; and as the operations of each
workman are gradually reduced to a greater degree of simplicity,
a variety of new machines come to be invented for facilitating and
abridging those operations. As the division of labour advances,
therefor&j in order to give constant employment to an equal number
of workmen, an equal stock of provisions, and a greater stock of
materials and tools than what would have been necessary in a ruder
state of things, must be accumulated beforehand. But the number
of workmen in every branch of business generally increases with
the division of labour in that branch, or rather it is the increase of
their number which enables them to class and subdivide themselves
in this manner.

As the accumulation of stock is previously necessary for carrying
on this great improvement in the productive powers of labour, so
that accumulation naturally leads to this improvement. The person
who employs his stocl^in maintaining labour, necessarily wishes to
employ it in such a manner as to produce as great a quantity of
work as possible. He endeavours, therefore, both to make among
his workmen the most proper distribution of employment, and to
furnish them with the best machines which he can either invent
or afford to purchase. His abilities in both these respects are gene-
rally in proportion to the extent of his stock, or to the number
of people whom it can employ. The quantity of industry, therefore,
not only increases in every country with the increase of the stock
which employs it, but, in consequence of that increase, the same
quantity of industry produces a much greater quantity of work.

Such are in general the effects of the increase of stock upon
industry and its productive powers.

In the following book I have endeavoured to explain the nature

short, conceive any state of society, con- and tho phenomena of accumulating

sidering the duration of infancy in the capital are most manifest when the divi-

human race, which shall be as abso- sion of labour is developed, but they are

lutely without accumulations as the life in their degree present under all cir-

of most among the lower animals is. It cumstances of human society,
is true that the necessity of possessing

DUCTION. THE WEALTH OF NATIONS. 275

of stock, the effects of its accumulation into capitals of different
kinds, and the effects of the different employments of those capitals.
This book is divided into five chapters. In the first chapter, I have
endeavoured to show what are the different parts or branches into
which the stock, either of an individual, or of a great society, natu-
rally divides itself. In the second, I have endeavoured to explain
the nature and operation of money considered as a particular branch
of the general stock of society. The stock which is accumulated
into a capital, may either be employed by the person to whom it
belongs, or it may be lent to some other person. In the third and
fourth chapters, I have endeavoured to examine the manner in which
it operates in both these situations. The fifth and last chapter
treats of the different effects which the different employments of
capital immediately produce upon the quantity both of national
industry and of the annual produce of land and labour.

CHAPTER L

OF THE DIVISION OF STOCK.

WHEN the stock which a man possesses is no more than suffi-
cient to maintain him for a few days or a few weeks, he
seldom thinks of deriving any revenue from it. He consumes it as
sparingly as he can, and endeavours by his labour to acquire some-
thing which may supply its place before it be consumed altogether.
His revenue is, in this case, derived from his labour only. This is
the state of the greater part of the labouring poor in all countries.

But when he possesses stock sufficient to maintain him for months
or years, he naturally endeavours to derive a revenue from the
greater part of it ; reserving only so much for his immediate con-
sumption as may maintain him till this revenue begins to come in.
His whole stock, therefore, is distinguished into two parts. That
part which, he expects, is to afford him this revenue, is called his
capital. The other is that which supplies his immediate consump-
tion ; and which consists either, first, in that portion of his whole
stock which was originally reserved for this purpose ; or, secondly,

T 2

276 THE NATURE AND CAUSES OF BOOK n.

in his revenue, from whatever source derived, as it gradually comes
in ; or, thirdly, in such things as had been purchased by either of
these in former years, and which are not yet entirely consumed ;
such as a stock of clothes, household furniture, and the like. In
one, or other, or all of these three articles, consists the stock which
men commonly reserve for their own immediate consumption.

There are two different ways in which a capital may be employed
so as to yield a revenue or profit to its employer.

First, it may be employed in raising, manufacturing, or pur-
chasing goods, and selling them again with a profit. The capital
employed in this manner yields no revenue or profit to its employer,
while it either remains in his possession, or continues in the same
shape. The goods of the merchant yield him no revenue or profit
till he sells them for money, and the money yields him as little till
it is again exchanged for goods. His capital is continually going
from him in one shape, and returning to him in another, and it is
only by means of such circulation, or successive exchanges, that it
can yield him any profit. Such capitals, therefore, may very pro-
perly be called circulating capitals.

Secondly, it may be employed in the improvement of land, in the
purchase of useful machines and instruments of trade, or in such-
like things as yield a revenue or profit without changing masters,
or circulating any further. Such capitals, therefore, may very pro-
perly be called fixed capitals.

Different occupations require very different proportions between
the fixed and circulating capitals employed in them.

The capital of a merchant, for example, is always a circulating
capital. He has occasion for no machines or instruments of trade,
unless his shop, or warehouse, be considered as such.

Some part of the capital of every master artificer or manufacturer
must be fixed in the instruments of his trade. This part, however,
is very small in some, and very great in others. A master tailor
requires no other instruments of trade but a parcel of needles.
Those of the master shoemaker are a little, though but a very little,
more expensive. Those of the weaver rise a good deal above those
of the shoemaker. The far greater part of the capital of all such
master artificers, however, is circulated, either in the wages of their
workmen, or in the price of their materials, and repaid with a profit
by the price of the work.

CHAP. i. THE WEALTH OF NATIONS. 277

In other works a much greater fixed capital is required. In
a great iron- work, for example, the furnace for melting the ore, the
forge, the slit-mill, are instruments of trade which cannot be
erected without a very great expense. In coal-works and mines of
every kind, the machinery necessary both for drawing out the
water and for other purposes, is frequently still more expensive.

That part of the capital of the farmer which is employed in the
instruments of agriculture is a fixed, that which is employed in the
wages and maintenance of labouring servants is a circulating,
capital. He makes a profit of the one by keeping it in his own
possession, and of the other by parting with it. The price or value
of his labouring cattle is a fixed capital in the same manner as that
of the instruments of husbandry: their maintenance is a circulating
capital in the same manner as that of the labouring servants. The
farmer makes his profit by keeping the labouring cattle, and by
parting with their maintenance. Both the pyice and the main-
tenance of the cattle which are bought in and fattened, not for
labour, but for sale, are a circulating capital. The farmer makes
his profit by parting with them. A flock of sheep or a herd of cattle
that, in a breeding country, is bought in, neither for labour nor for
sale, but in order to make a profit by their wool, by their milk, and
by their increase, is a fixed capital. The profit is made by keeping
them. Their maintenance is a circulating capital. The profit is
made by parting with it ; and it comes back with both its own
profit, and the profit upon the whole price of the cattle, in the price
of the wool, the milk, and the increase. The whole value of the
seed too is properly a fixed capital. Though it goes backwards
and forwards between the ground and the granary, it never changes
masters, and therefore does not properly circulate. The farmer
makes his profit, not by its sale, but by its increase.

The general stock of any country or society is the same with that
of all its inhabitants or members, and therefore naturally divides
itself into the same three portions, each of which has a different
function or office.

The first is that portion which is reserved for immediate con-
sumption, and of which the characteristic is, that it affords no
revenue or profit. It consists in the stock of food, clothes, house-
hold furniture, &c., which have been purchased by their proper
consumers, but which are not yet entirely consumed. The whole

278 THE NATURE AND CAUSES OF BOOK ir.

stock of mere dwelling-houses too subsisting at any one time in
the country, make a part of this first portion. The stock that is laid
out in a house, if it is to be the dwelling-house of the proprietor,
ceases from that moment to serve in the function of a capital, or to
afford any revenue to its owner. A dwelling-house, as such, con-
tributes nothing to the revenue of its inhabitant ; and though it is,
no doubt, extremely useful to him, it is as his clothes and household
furniture are useful to him, which, however, make a part of his
expense, and not of his revenue. If it is to be let to a tenant for
rent, as the house itself can produce nothing, the tenant must
always pay the rent out of some other revenue which he derives
either from labour, or stock, or land. Though a house, therefore,
may yield a revenue to its proprietor, and thereby serve in the
function of a capital to him, it cannot yield any to the public, nor
serve in the function of a capital to it, and the revenue of the whole
body of the people can never be in tho smallest degree increased by
it. Clothes and household furniture, in the same manner, some-
times yield a revenue, and thereby serve in the function of a capital
to particular persons. In countries where masquerades are common,
it is a trade to let out masquerade dresses for a night. Upholsterers
frequently let furniture by the month or by the year. Undertakers
let the furniture of funerals by the day and by the week. Many
people let furnished houses, and get a rent, not only for the use of
the house, but for that of the furniture. The revenue, however,
which is derived from such things must always be ultimately drawn
from some other source of revenue. Of all parts of the stock, either
of an individual or of a society, reserved for immediate consumption,
what is laid out in houses is most slowly consumed. A stoek of
clothes may last several years ; a stock of furniture half a century
or a century; but a stock of houses, well built and properly taken
care of, may last many centuries. Though the period of their total
consumption, however, is more distant, they are still as really
a stock reserved for immediate consumption as either clothes or
household furniture.

The second of the three portions into which the general stock
of the society divides itself is the fixed capital ; of which the
characteristic is, that it affords a revenue or profit without cir-
culating or changing masters. It consists chiefly of the four fol-
lowing articles :

CHAP. i. THE WEALTH OF NATIONS. 279?

First, Of all useful machines and instruments of trade which
facilitate and abridge labour;

Secondly, Of all those profitable buildings which are the means
of procuring a revenue, not only to their proprietor, who lets them
for a rent, but to the person who possesses them, and pays that
rent for them ; such as shops, warehouses, workhouses, farmhouses,
with all their necessary buildings, stables, granaries, &c. These
are very different from mere dwelling-houses. They are a sort of
instruments of trade, and may be considered in the same light ;

Thirdly, Of the improvements of land, of what has been pro-
fitably laid out in clearing, draining, enclosing, manuring, and
reducing it into the condition most proper for tillage and culture.
An improved farm may very justly be regarded in the same light
as those useful machines which facilitate and abridge labour, and
by means of which an equal circulating capital can afford a much
greater revenue to its employer. An improved farm is equally
advantageous and more durable than any of those machines, fre-
quently requiring no other repairs than the most profitable appli-
cation of the farmer's capital employed in cultivating it ;

Fourthly, Of the acquired and useful abilities of all the in-
habitants or members of the society. The acquisition of such
talents, by the maintenance of the acquirer during his education,
study, or apprenticeship, always costs a real expense, which is a
capital fixed and realized, as it were, in his person. Those talents,
as they make a part of his fortune, so do they likewise of that of the
society to which he belongs. The improved dexterity of a workman
may be considered in the same light as a machine or instrument of
trade which facilitates and abridges labour, and which, though it
costs a certain expense, repays that expense with a profit.

The third and last of the three portions into which the general
stock of the society naturally divides itself is the circulating
capital ; of which the characteristic is, that it affords a revenue
only by circulating or changing masters. It is composed likewise
of four parts :

First, Of the money by means of which all the other three are
circulated and distributed to their proper consumers ;*

1 Money is circulating capital to its ating obligations contracted with foreign-
individual possessor. It is also cirou- era. But in so far as it is the machinery
lating capital when it is employed in of the home trade, and is relevant to the
foreign trade, for the purpose of liquid- general necessities of the whole com-

280 THE NATURE AND CAUSES OF BOOK n.

Secondly, Of the stock of provisions which are in the possession
of the butcher, the grazier, the farmer, the corn-merchant, the
brewer, &c., and from the sale of which they expect to derive
a profit ;

Thirdly, Of the materials, whether altogether rude, or more or
less manufactured, of clothes, furniture, and building, which are
not yet made up into any of those three shapes, but which remain
in the hands of the growers, the manufacturers, the mercers and
drapers, the timber-merchants, the carpenters and joiners, the brick-
makers, &c.;

Fourthly, and lastly, Of the work which is made up and com-
pleted, but which is still in the hands of the merchant or manu-
facturer, and not yet disposed of or distributed to the proper
consumers ; such as the finished work which we frequently find
ready-made in the shops of the smith, the cabinet-maker, the gold-
smith, the jeweller, the china-merchant, &c. The circulating capital
consists in this manner of the provisions, materials, and finished
work of all kinds that are in the hands of their respective dealers,
and of the money that is necessary for circulating and distributing
them to those who are finally to use or to consume them.

Of these four parts, three, provisions, materials, and finished work,
are, either annually, or in a longer or shorter period, regularly with-
drawn from it, and placed cither in the fixed capital or in the stock
reserved for immediate consumption.

Every fixed capital is both originally derived from, and requires
to be continually supported by a circulating capital. All useful
machines and instruments of trade are originally derived from a
circulating capital, which furnishes the materials of which they
are made, and the maintenance of the workmen who make them.
They require too a capital of the same kind to keep them in
constant repair.

No fixed capital can yield any revenue but by means of a cir-
culating capital. 1 The most useful machines and instruments of
trade will produce nothing without the circulating capital which
affords the materials they are employed upon, and the maintenance

munity, it is as much fixed capital as fixed capital.

any other kind of machinery, and the l ' Lea richesses mobiliaires sont un

more completely it is adapted to this prdalable indispensable pour tous lea

process of completing transactions, so travaux lucratifs.' Turgot, Sur, &c.,

much more does it possess the nature of 53.

CHAP. i. THE WEALTH OF NATIONS. 281

of the workmen who employ them. Land, however improved, will
yield no revenue without a circulating capital, which maintains
the labourers who cultivate and collect its produce.

To maintain and augment the stock which may be reserved for
immediate consumption, is the solo end and purpose both of the
fixed and circulating capitals. It is this stock which feeds, clothes,
and lodges the people. Their riches or poverty depends upon the
abundant or sparing supplies which those two capitals can afford
to the stock reserved for immediate consumption.

So great a part of the circulating capital being continually with-
drawn from it, in order to be placed in the other two branches
of the general stock of the society, it must in its turn requirfe
continual supplies, without which it would soon cease to exist.
These supplies are principally drawn from three sources the
produce of land, of mines, and of fisheries. These afford continual
supplies of provisions and materials, of which part is afterwards
wrought up into finished work, and by which are replaced the
provisions, materials, and finished work continually withdrawn from
the circulating capital. From mines too is drawn what is necessary
for maintaining and augmenting that part of it which consists
in money. For though, in the ordinary course of business, this
part is not, like the other three, necessarily withdrawn from it,
in order to be placed in the other two branches of the general
stock of the society, it must, however, like all other things, be
wasted and worn out at last, and sometimes too be either lost
or sent abroad, and must, therefore, require continual, though, no
doubt, much smaller supplies.

Land, mines, and fisheries require all both a fixed and a cir-
culating capital to cultivate them ; and their produce replaces with
a profit, not only those capitals, but all the others in the society.
Thus the farmer annually replaces to the manufacturer the pro-
visions which he had consumed and the materials which he had
wrought up the year before ; and the manufacturer replaces to the
farmer the finished work which he had wasted and worn out in
the same time. This is the real exchange that is annually made
between those two orders of people, though it seldom happens that
the rude produce of the one and the manufactured produce of the
other are directly bartered for one another; because it seldom
happens that the farmer sells his corn and his cattle, his flax and

282 THE NATURE AND CAUSES OF BOOK n.

his wool, to the very same person of whom he chooses to purchase
the clothes, furniture, and instruments of trade which he wants.
He sells, therefore, his rude produce for money, with which he
can purchase, wherever it is to be had, the manufactured produce
he has occasion for. Land even replaces, in part, at least, the
capitals with which fisheries and mines are cultivated. It is the
produce of land which draws the fish from the waters ; and it is
the produce of the surface of the earth which extracts the minerals
from its bowels.

The produce of land, mines, and fisheries, when their natural
fertility is equal, is in proportion to the extent and proper appli-
cation of the capitals employed about them. When the capitals
are equal and equally well applied, it is in proportion to their
natural fertility.

In all countries where there is tolerable security, every man of
common understanding will endeavour to employ whatever stock
he can command in procuring either present enjoyment or future
profit. If it is employed in procuring present enjoyment, it is
a stock reserved for immediate consumption. If it is employed
in procuring future profit, it must procure this profit either by
staying with him, or by going from him. In the one case it is
a fixed, in the other it is a circulating capital. A man must be
perfectly crazy who, where there is tolerable security, does not
employ all the stock which he commands, whether it be his own
or borrowed of other people, in some one or other of those three
ways.

In those unfortunate countries, indeed, where men are continually
afraid of the violence of their superiors, they frequently bury and
conceal a great part of their stock, in order to have it always at
hand to carry with them to some place of safety, in case of their
being threatened with any of those disasters to which they consider
themselves as at all times exposed. This is said to be a common
practice in Turkey, in Hindostan, and, I believe, in most other
governments of Asia. It seems to have been a common practice
among our ancestors during the violence of the feudal government.
Treasure-trove was in those times considered as no contemptible
part of the revenue of the greatest sovereigns in Europe. It con-
sisted in such treasure as was found concealed in the earth, and
to which no particular person could prove any right. This was

CHAP. ii. THE WEALTH OF NATIONS. 283

regarded in those times as so important an object, that it was
always considered as belonging to the sovereign, and neither to
the finder nor to the proprietor of the land, unless the right to
it had been conveyed to the latter by an express clause in his
charter. It was put upon the same footing with gold and silver
mines, which, without a special clause in the charter, were never
supposed to be comprehended in the general grant of the lands,
though mines of lead, copper, tin, and coal were, as things of
smaller consequence.

CHAPTER II.

OF MONEY CONSIDERED AS A PARTICULAR BRANCH OF THE GENERAL
STOCK OF THE SOCIETY, OR OF THE EXPENSE OF MAINTAINING THE
NATIONAL CAPITAL.

IT has been shown in the First Book, that the price of the greater
part of commodities resolves itself into three parts, of which
one pays the wages of the labour, another the profits of the stock,
a third the rent of the land which had been employed in producing
and bringing them to market : that there are, indeed, some com-
modities of which the price is made up of two of those parts only,
the wages of labour and the profits of stock ; and a very few in
which it consists altogether in one, the wages of labour ; l but that
the price of every commodity necessarily resolves into some one, or
other, or all, of these three parts; every part of it which goes
neither to rent nor to wages being necessarily profit to somebody.

Since this is the case, it has been observed, with regard to every
particular commodity taken separately, it must be so with regard
to all the commodities which compose the whole annual produce of
the land and labour of eveiy country, taken complexly. The whole
price or exchangeable value of that annual produce must resolve
itself into the same three parts, and be parcelled out among the
different inhabitants of the country, cither as the wages of their
labour, the profits of their stock, or the rent of their land.

1 It is impossible that the price of any that the maintenance and education of
commodity should be constituted entirely labour are no investments of capital. See
by the wages of labour, unless we assume above, p. 279, line 20 sqq.

284 THE NATURE AND CAUSES OF BOOK IT.

But though the whole- value of the annual produce of the land
and labour of every country is thus divided among 1 and constitutes
a revenue to its different inhabitants, yet as in the rent of a private
estate we distinguish between the gross rent and the net rent, so
may we likewise in the revenue of all the inhabitants of a great
country.

The gross rent of a private estate comprehends whatever is paid
by the farmer; the net rent, what remains free to the landlord,
after deducting the expense of management, of repairs, and all
other necessary charges ; or what, without hurting his estate, he
can afford to place in his stock reserved for immediate consumption,
or to spend upon his table, equipage, the ornaments of his house
and furniture, his private enjoyments and amusements. His real
wealth is in proportion, not to his gross, but to his net rent.

The gross revenue of all the inhabitants of a great country com-
prehends the whole annual produce of their land and labour ; the
net revenue, what remains free to them after deducting the expense
of maintaining, first, their fixed, and, secondly, their circulating
capital ; or what, without encroaching upon their capital, they can
place in their stock reserved for immediate consumption, or spend
upon their subsistence, conveniences, and amusements. The real
wealth too is in proportion, not to their gross, but to their net
revenue.

The whole expense of maintaining the fixed capital must
evidently be excluded from the net revenue of the society. Neither
the materials necessary for supporting their useful machines and
instruments of trade, their profitable buildings, &c., nor the
produce of the labour necessary for fashioning those materials
into the proper form, can ever make any part of it. The price
of that labour may indeed make a part of it ; as the workmen
so employed may place the whole value of their wages in their
stock reserved for immediate consumption. But in other sorts of
labour, both the price and the produce go to the stock, the price to
that of the workmen, the produce to that of other people, whose
subsistence, conveniences, and amusements are augmented by the
labour of those workmen.

The intention of the fixed capital is to increase the productive
powers of labour, or to enable the same number of labourers to
perform a much greater quantity of work. In a farm where all the

CHAP. ii. THE WEALTH OF NATIONS. 285

necessary buildings, fences, drains, communications, &c., are in the
most perfect good order, the same number of labourers and labouring
cattle will raise a much greater produce than in one of equal extent
and equally good ground, but not furnished with equal conveniences.
In manufactures the same number of hands, assisted with the best
machinery, will work up a much greater quantity of goods than
with more imperfect instruments of trade. The expense which is
properly laid out upon a fixed capital of any kind, is always repaid
with great profit, and increases the annual produce by a much
greater value than that of the support which such improvements
require. This support, however, still requires a certain portion of
that produce. A certain quantity of materials, and the labour of
a certain number of workmen, both of which might have been
immediately employed to augment the food, clothing and lodging,
the subsistence and conveniences of the society, are thus diverted
to another employment, highly advantageous indeed, but still
different from this one. It is upon this account that all such
improvements in mechanics, as enable the same number of work-
men to perform an equal quantity of work, with cheaper and
simpler machinery than had been usual before, are always regarded
as advantageous to every society. A certain quantity of materials,
and the labour of a certain number of workmen, which had before
been employed in supporting a more complex and expensive machi-
nery, can afterwards be applied to augment the quantity of work
which that or any other machinery is useful only for performing.
The undertaker l of some great manufactory who employs a thou-
sand a year in the maintenance of his machinery, if he can reduce
this expense to five hundred, will naturally employ the other five
hundred in purchasing an additional quantity of materials to be
wrought up by an additional number of workmen. The quantity
of that work, therefore, which his machinery was useful only for
performing, will naturally be augmented, and with it all the advan-
tage and conveniency which the society can derive from that work.
The expense of maintaining the fixed capital in a great country
may very properly be compared to that of repairs in a private
estate. The expense of repairs may frequently be necessary for
supporting the produce of the estate, and consequently both the

1 Mr. Mill regrets that this word (as fallen into disuse. Smith uses it in the
used in this passage by Adam Smith) has modern sense, p. 2; 8.

286 THE NATURE AND CAUSES OF BOOK n.

gross and the net rent of the landlord. When by a more proper
direction, however, it can be diminished without occasioning any
diminution of produce, the gross rent remains at least the same
as before, and the net rent is necessarily augmented.

But though the whole expense of maintaining the fixed capital
is thus necessarily excluded from the net revenue of the society,
it is not the same case with that of maintaining the circulating
capital. Of the four parts of which this latter capital is composed,
money, provisions, materials, and finished work, the three last, it
has already been observed, are regularly withdrawn from it, and
placed either in the fixed capital of the society, or in their stock
reserved for immediate consumption. Whatever portion of those
consumable goods is not employed in maintaining the former, goes
all to the latter, and makes a part of the net revenue of the society.
The maintenance of those three parts of the circulating capital,
therefore, withdraws no portion of the annual produce from the
net revenue of the society, besides what is necessary for maintaining
the fixed capital.

The circulating capital of a society is in this respect different
from that of an individual. That of an individual is totally ex-
cluded from making any part of his net revenue, which must consist
altogether in his profits. But though the circulating capital of every
individual makes a part of that of the society to which he belongs,
it is not upon that account totally excluded from making a part
likewise of their net revenue. Though the whole goods in a mer-
chant's shop must by no means be placed in his own stock reserved
for immediate consumption, they may in that of other people, who,
from a revenue derived from other funds, may regularly replace
their value to him, together with its profits, without occasioning
any diminution either of his capital or of theirs.

Money, therefore, is the only part of the circulating capital of
a society, of which the maintenance can occasion any diminution
in their net revenue.

The fixed capital, and that part of the circulating capital which
consists in money, so far as they affect the revenue of the society,
bear a very great resemblance to one another.

First, as those machines and instruments of trade, &c., require
a certain expense, first to erect them, and afterwards to support
them, both which expenses, though they make a part of the gross,

CHAP. ii. THE WEALTH OF NATIONS. 287

are deductions from the net revenue of the society; so the stock of
money which circulates in any country must require a certain ex-
pense, first to collect it, and afterwards to support it, both which
expenses, though they make a part of the gross, are, in the same
manner, deductions from the net revenue of the society. A certain
quantity of very valuable materials, gold and silver, and of very
curious labour, instead of augmenting the stock reserved for imme-
diate consumption, the subsistence, conveniences, and amusements
of individuals, is employed in supporting that great but expensive
instrument of commerce, by means of which every individual in the
society has his subsistence, conveniences, and amusements, regularly
distributed to him in their proper proportions.

Secondly, as the machines and instruments of trade, &c., which
compose the iixed capital either of an individual or of a society,
make no part either of the gross or of the net revenue of either,
so money, by means of which the whole revenue of the society
is regularly distributed among all its different members, makes
itself no part of that revenue. The great wheel of circulation is
altogether different from the goods which are circulated by means
of it. The revenue of the society consists altogether in those
goods, and not in the wheel which circulates them. In computing
either the gross or the net revenue of any society, w^e must always,
from their whole annual circulation of money and goods, deduct
the whole value of the money, of which not a single farthing can
ever make any part of either.

It is the ambiguity of language only which can make this
proposition appear either doubtful or paradoxical. When properly
explained and understood, it is almost self-evident.

When we talk of any particular sum of money, we sometimes
mean nothing but the metal pieces of which it is composed ; and
sometimes we include in our meaning some obscure reference to the
goods which can be had in exchange for it, or to the power of
purchasing which the possession of it conveys. Thus when we say
that the circulating money of England has been computed at
eighteen millions, 1 we mean only to express the amount of the

1 The ingenious calculations of Mr. public, 14,000,000 silver, 1,000,000

Stanley Jevons (Statistical Society's copper. To this may be added an aver-

Journnl, Dec. 1868, p. 447), fix the cir- age amount of 15,000,000 bullion in the

culation of the United Kingdom at possession of the Bank of England,

80,000,000 gold in the hands of the making a total of 110,000,000! In

288 THE NATURE AND CAUSES OF BOOK IT.

metal pieces which some writers have computed, or rather have
supposed, to circulate in that country. But when we say that
a man is worth fifty or a hundred pounds a year, we mean com-
monly to express not only the amount of the metal pieces which are
annually paid to him, but the value of the goods which he can
annually purchase or consume. We mean commonly to ascertain
what is or ought to be his way of living, or the quantity and
quality of the necessaries and conveniences of life in which he can
with propriety indulge himself.

When, by any particular sum of money, we mean not only to
express the amount of the metal pieces of which it is composed, but
to include in its signification some obscure reference to the goods
which can be had in exchange for them, the wealth or revenue
which it in this case denotes, is equal only to one of the t\vo values
which are thus intimated somewhat ambiguously by the same word,
and to the latter more properly than to the former, to the money 's
worth more properly than to the money.

Thus if a guinea be the weekly pension of a particular person,
he can in the course of the week purchase with it a certain quantity
of subsistence, conveniences, and amusements. In proportion as
this quantity is great or small, so are his real riches, his real
weekly revenue. His weekly revenue is certainly not equal both
to the guinea, and to what can be purchased with it, but only
to one or other of those two equal values ; and to the latter more
properly than to the former, to the guinea's worth rather than
to the guinea.

If the pension of such a person was paid to him, not in gold,
but in a weekly bill for a guinea, his revenue surely would not
so properly consist in the piece of paper, as in what he could
get for it. A guinea may be considered as a bill for a certain
quantity of necessaries and conveniences upon all the tradesmen
in the neighbourhood. The revenue of the person to whom it
is paid, does not so properly consist in the piece of gold, as
in what he can get for it, or in what he can exchange it for.
If it could be exchanged for nothing, it would, like a bill upon

1856, MrfNewmarch (Tooke and New- of Mr. Jevons* paper, the annual increase

march's History of Prices, vol. vi. p. 696) of the currency has been roughly eati*

calculated the amount of gold coin in cir- mated at two millions.
culation at 75,000,000. Since the date

CHAP. n. THE WEALTH OF NATIONS. 289

a bankrupt, be of no more value than the most useless piece of
paper.

Though the weekly or yearly revenue of all the different in-
habitants of any country, in the same manner, may be, and in
reality frequently is, paid to them in money, their real riches,
however, the real weekly or yearly revenue of all of them taken
together, must always be great or small in proportion to the
quantity of consumable goods which they can all of them purchase
with this money. The whole revenue of all of them taken to-
gether is evidently not equal to both the money and the consum-
able goods ; but only to one or other of those two values, and
to the latter more properly than to the former.

Though we frequently, therefore, express a person's revenue by
the metal pieces which are annually paid to him, it is because
the amount of those pieces regulates the extent of his power of
purchasing, or the value of the goods which he can annually
afford to consume. We still consider his revenue as consisting in
this power of purchasing or consuming, and not in the pieces
which convey it.

But if this is sufficiently evident even with regard to an in-
dividual, it is still more so with regard to a society. The amount
of the metal pieces which are annually paid to an individual, is
often precisely equal to his revenue, and is upon that account
the shortest and best expression of its value. But the amount of
the metal pieces which circulate in a society, can never be equal
to the revenue of all its members. As the same guinea which
pays the weekly pension of one man to-day, may pay that of
another to-morrow, and that of a third the day thereafter, the
amount of the metal pieces which annually circulate in any country,
must always be of much less value than the whole money pen-
sions annually paid with them. But the power of purchasing,
or the goods which can successively be bought with the whole of
those money pensions as <fchey are successively paid, must always
be precisely of the same ralue with those pensions ; as must like-
wise be the revenue of the different persons to whom they are paid.
That revenue, therefore, cannot consist in those metal pieces, of
which the amount is so much inferior to its value, but in the
power of purchasing, in the goods which can successively be bought
with them as they circulate from hand to hand.

VOL. i. u

290 THE NATURE AND CAUSES OF BOOK IT.

Money, therefore, the great wheel of circulation, the great in-
strument of commerce, like all other instruments of trade, though
it makes a part and a very valuable part of the capital, makes
no part of the revenue of the society to which it belongs ; and
though the metal pieces of which it is composed, in the course
of their annual circulation, distribute to every man the revenue
which properly belongs to him, they make themselves no part x>f
that revenue. 1

Thirdly, and lastly, The machines and instruments of trade, &c.,
which compose* the fixed capital, bear this further resemblance to
that part of the circulating capital which consists in money ; that
as every saving in the expense of erecting and supporting those
machines, which does not diminish the productive powers of labour,
is an improvement of the net revenue of that society; so every
saving in the expense of collecting and supporting that part of
the circulating capital which consists in money is an improvement
of exactly the same kind.

It is sufficiently obvious, and it has partly too been explained
already, in what manner every saving in the expense of supporting
the fixed capital is an improvement of the net revenue of the
society. The whole capital of the undertaker of every work is
necessarily divided between his fixed and his circulating capital.
While hi& whole capital remains the same, the smaller the one
part, the- greater must necessarily be the other. It is the circu-
lating capital which furnishes the materials and wages of labour,
and puts industry into motion. Every saving, therefore, in the
expense of maintaining the fixed capital, which does not diminish
the pi'oductive powers of labour, must increase the fund which puts
industry into motion, and consequently the annual produce of land
and labour, the real revenue of every society.

The substitution of paper in the room of gold and silver money
replaces a very expensive instrument of commerce with one much
less costly, and sometimes equally convenient. Circulation comes
to be carried on by a new wheel, which, it costs less both to erect
and to maintain than the old one. xJut in what manner this
operation is performed, and in what manner it tends to increase

1 ' La circulation de 1'argent, cette cir- tique, et qu'on a grande raison de com-

culatioji. utile et feconde qui anime tous parer a la circulation du Bang dans le

lea travaux de la socie'te', qui entretient corps animal.' Turgot, Sur, &c. 69.
le inouvement et la vie dans le corps poll*

CHAP. ii. THE WEALTH OF NATIONS. 291

either the gross or the net revenue of the society, is not alto-
gether so obvious, and may therefore require some further ex-
plication.

There are several different sorts of paper money; but the cir-
culating notes of banks and bankers are the species which is best
known, and which seems best adapted for this purpose.

When the people of any particular country have such confidence
in the fortune, probity, and prudence of & particular banker, as
to believe that he is always ready to pay upon demand such of
his promissory notes as are likely to be at any time presented
to him ; those notes come to have the same currency as gold and
silver money, from the confidence that such money can at any
time be had for them.

A particular banker lends among his customers his own pro-
missory notes to the extent, we shall suppose, of a hundred thousand
pounds. As those notes serve all the purposes of money, his debtors
pay him the same interest as if he had lent them so much money.
This interest is the source of his gain. Though some of those
notes are continually coming back upon him for payment, part of
them continue to circulate for months and years together. Though
he has generally in circulation, therefore, notes to the extent of
a hundred thousand pounds, twenty thousand pounds in gold and
silver may frequently he a sufficient provision for answering
occasional demands. By this operation,, therefore, twenty thousand
pounds in gold and silver perform all the functions which a hundred
thousand could otherwise have performed. The same exchanges
may be made, the same quantity of consumable goods may be cir-
culated and distributed to their proper consumers, by means of
his promissory notes to the value of a hundred thousand pounds,
as by an equal value of gold and silver money. Eighty thousand
pounds of gold and silver, therefore, can, in this manner, be spared
from the circulation of the country; and if different operations
of the same kind should, at the same time, be carried on by many
different banks and bankers, the whole circulation may thus be
conducted with a fifth part only of the gold and silver which would
otherwise have been requisite.

Let us suppose, for example, that the whole circulating money
of some particular country amounted, at a particular time, to one
million sterling, that sum being then sufficient for circulating the

TT 1

292 THE NATURE AND CAUSES OF BOOK a!

whole annual produce of their land and labour. Let us suppose,
too, that some time thereafter, different banks and bankers issued
promissory notes, payable to the bearer, to the extent of one million,
reserving in their different coffers two hundred thousand pounds
for answering occasional demands. There would remain therefore,
in circulation, eight hundred thousand pounds in gold and silver,
and a million of bank notes, or eighteen hundred thousand pounds
of paper and money together. But the annual produce of the
land an4 labour of the country had before required only one million
to circulate and distribute it to its proper consumers, and that
annual produce cannot be immediately augmented by those opera-
tions of banking. One million, therefore, will be sufficient to cir-
culate it after them. The goods to be bought and sold being
precisely the same as before, the same quantity of money will be
sufficient for buying and selling them. The channel of circulation,
if I may be allowed such an expression, will remain precisely the
same as before. One million we have supposed sufficient to fill
that channel. Whatever, therefore, is poured into it beyond this
sum, cannot run in it, but must overflow. One million eight
hundred thousand pounds are poured into it. Eight hundred
thousand pounds, therefore, must overflow, that sum being over
and above what can be employed in the circulation of the country.
But though this sum cannot be employed at home, it is too valu-
able to be allowed to lie idle. It will, therefore, be sent abroad,
in order to seek that profitable employment which it cannot find
at home. But the paper cannot go abroad ; because at a distance
from the banks which issue it, and from the country in which
payment of it can be exacted by law, it will not be received in
common payments. Gold and silver, therefore, to the amount of
eight hundred thousand pounds will be sent abroad, and the channel
of home circulation will remain filled with a million of paper,
instead of the million of those metals which filled it before.

But though so great a quantity of gold and silver is thus sent
abroad, we must not imagine that it is sent abroad for nothing,
or that its proprietors make a present of it to foreign nations.
They will exchange it for foreign goods of some kind or another,
in order to supply the consumption either of some other foreign
country, or of their own.

If they employ it in purchasing goods in one foreign country

CHAP. n. THE WEALTH OF NATIONS. 293

in order to supply the consumption of another, or in what is called
the carrying trade, whatever profit they make will be an addition
to the net revenue of their own country. It is like a new fund,
created for carrying on a new trade ; domestic business being now
transacted by paper, and the gold and silver being converted into
a fund for this new trade.

If they employ it in purchasing foreign goods for home con-
sumption, they may either, first, purchase such goods as are likely
to be consumed by idle people who produce nothing, such as foreign
wines, foreign silks, &c. ; or, secondly, they may purchase an ad-
ditional stock of materials, tools, and provisions, in order to main-
lain and employ an additional number of industrious people, who
re-produce, with a profit, the value of their annual consumption.

So far as it is employed in the first wa} r , it promotes prodigality,
increases expense and consumption without increasing production,
or establishing any permanent fund for supporting that expense,
and is in every respect hurtful to the society. 1

So far as it is employed in the second way, it promotes industry;
and though it increases the consumption of the society, it provides
n permanent fund for supporting that consumption, the people who
consume re-producing, with a profit, the whole value of their
annual consumption. The gross revenue of the society, the annual
produce of their land and labour, is increased by the whole value
which the labour of those workmen adds to the materials upon
which they are employed ; and their net revenue by what remains
of this value, after deducting what is necessary for supporting the
tools and instruments of their trade.

That the greater part of the gold and silver which, being forced
abroad by those operations of banking, is employed in purchasing
foreign goods for home consumption, is and must be employed in
purchasing those of this second kind, seems not only probable but

1 Only in the same way that any other society becomes collectively poorer; in

consumption is, from which neither di- the latter, the condition of those who live

rectly nor indirectly any reproduction of by the commonest kinds of labour, may

wealth ensues. Not that such a consump- become progressively worse, ^ though the

tion is hurtful to society. Expenditure country itself may increase in opulence,

is mischievous to society only when it is The most marked among the defects of

in excess of saving ; or when it interferes, Smith's great work are to be found in

by the maintenance of a host of persons those parts of the Wealth of Nations

whose labour is devoted solely to the which deal with the accumulation of

enjoyments of others, with the distribu- wealth, and criticise the artificial hin-

tion of wealth. In the former case, drances which are put on its distribution.

294 THE NATURE AND CAUSES OF BOOK n.

almost unavoidable. Though some particular men may sometimes
increase their expense very considerably, though their revenue does
not increase at all, we may be assured that no class or order of men
ever does so ; because, though the principles of common prudence
do not always govern the conduct -of every individual, they always
influence that of the majority of every class or order. But the
revenue of idle people, considered as a class or order, cannot, in the
smallest degree, be increased by 'those operations of banking. Their
expense 4n general, therefore, cannot be much increased by them,
though that of a few individuals among many may, and in reality
sometimes is. The demand of idle people, therefore, for foreign
goods, being the same, or very nearly the same, as before, a very
small part of the money, which being forced abroad by those ope-
rations of banking, is employed in purchasing foreign goods for
home consumption, is likely to be employed in purchasing those for
their use. The greater part of it will naturally be destined for the
employment of industry, and not for the maintenance of idleness.

When we compute the quantity of industry which the circulating
capital of any society can employ, we must always have regard to
those parts of it only, which consist in provisions, materials, and*
finished work: the -other, which consists in money, and which
serves only to circulate those three, must always be deducted. In
order to put industry into motion, three things are requisite : mate-
rials to work upon, tools to work with, and the wages or recompense
for the sake of which the work is done. Money is neither a mate-
rial to work upon, nor a tool to work with ; and though the wages
of the workmen are commonly paid to him in money, his real
revenue, like that of all other men, consists, not in the money, but
in the money's worth ; not in the metal pieces, but in what can be
got for them.

The quantity of industry which any capital can employ, must
evidently be equal to the number of workmen whom it can supp y
with materials, tools, and a maintenance suitable to the nature of
the work. Money may be requisite for purchasing the materials
and tools of the work, as well as the maintenance of the workmen.
But the quantity of industry which the whole capital can employ,
is certainly not equal both to the money which purchases, and to,
the materials, tools, and maintenance, which are purchased with it j
but only to one or other of those two values, and to the latter more
properly than to the former.

CHAP. n. THE WEALTH OF ^NATIONS. 295

When paper is substituted in the room of gold and silver money,
the quantity of the materials, tools, and maintenance, which the
whole circulating capital can supply, may be increased by the whole
value of gold and silver which used to be employed in purchasing
them. The whole value of the great wheel of circulation and dis-
tribution is added to the goods which are circulated and distributed
by means of it. The operation, in some measure, resembles that of
the undertaker of some great work, who, in consequence of some
improvement in mechanics, takes down his old machinery and adds
the difference between its price and that of the new to his circula-
ting capital, to the fund from which he furnishes materials and
wages to his workmen.

What is the proportion which the circulating money of any
country bears to the whole value of the annual produce circulated
by means of it, it is, perhaps, impossible to determine. It has been,
computed by different authors at a fifth, at a tenth, at a twentieth,
and at a thirtieth part of that value. 1 But how small soever the
proportion which the circulating money may bear to the whole
value of the annual produce, as but a part, and frequently but a
small part, of that produce, is ever destined for the maintenance of
industry, it must always bear a very considerable proportion to that
part. When, therefore, by the substitution of paper, the gold and
silver necessary for circulation is reduced to, perhaps, a fifth part of
the former quantity, if the value of only the greater part of the
other four- fifths be added to the funds which are destined for the
maintenance of industry, it must make a very considerable addition
to the quantity of that industry, and, consequently, to the value of
the annual produce of land and labour.

An operation of this kind has, within these five-and-twenty or
thirty years, been performed in Scotland, by the erection of new
banking companies in almost every considerable town, and even in
some country villages. The effects of it have been precisely those
above described. The business of the country is almost entirely
carried on by means of the paper of those different banking com-
panies, with which purchases and payments of all kinds are com-
monly made. Silver very seldom appears except in the change of

1 In the calculations of Mr. Jcvons on in the United Kingdom, the proportion

the one hand, and various statisticians between the circulation and the annual

on the other, who have estimated the income of the country is as one to six,

annual produce of capital and labour seven, or eight.

296 THE NATURE AND CA USES OF BOOK n.

a twenty shillings bank note, and gold still seldomer. But though
the conduct of all those different companies has not been unexcep-
tionable, and has accordingly required an Act of Parliament to
regulate it ; the country, notwithstanding, has evidently derived
great benefit from their trade. 1 have heard it asserted, that the
trade of the city of Glasgow doubled in about fifteen years after t\\e
first erection of the banks there ; and that the trade of Scotland has
more than quadrupled since the first erection of the two public
banks at Edinburgh, of which the one, called The Bank of Scotland,
was established by Act of Parliament in 1695; l the other, called
The Royal Bank, by royal charter in 1727. Whether the trade,
either of Scotland in general, or of the city of Glasgow in particular,
has really increased in so great a proportion, during so short a
period, I do not pretend to know. If either of them has increased
in this proportion, it seems to be an eflect too great to be accounted
for by the sole operation of this cause. That the trade and industry
of Scotland, however, have increased very considerably during this
period, and that the banks have contributed a good deal to < this
increase, cannot be doubted.

The value of the silver money which circulated in Scotland before
the union, in 1707, and which, immediately after it, was brought
into the Bank of Scotland in order to be re-coined, amounted to
^411,117 IQS. d. sterling. No account has been got of the gold
coin ; but it appears from the ancient accounts of the Mint of
Scotland, that the value of the gold annually coined somewhat
exceeded that of the silver.* There were a good many people too
upon this occasion, who, from a diffidence of repayment, did not
bring their silver into the Bank of Scotland ; and there was, besides,
some English coin, which was not called in. The whole value of
the gold and silver, therefore, which circulated in Scotland before
the union, cannot be estimated at less than a million sterling. It
seems to have constituted almost the whole circulation of that
country; for though the circulation of the Bank of Scotland, which
had then no rival, was considerable, it seems to have made but a
very small part of the whole. In the present' times, the whole cir-
culation of Scotland cannot be estimated at less than two millions,
of which that part which consists in gold and silver, most probably,

1 Acta Parliamentorum Gulielmi, 1695. 88. (Edition of 1822, p. 494).
* See Ruddiman's Preface to Anderson's Diplomata, &c. Scotise.

CHAP. ii. THE WEALTH OF NATIONS. 297

does not amount to half a million. But though the circulating
gold and silver of Scotland have suffered so great a diminution
during this period, its real riches and prosperity do not appear to
have suffered any. Its agriculture, manufactures, and trade, on the
contrary, the annual produce of its land and labour, have evidently
been augmented.

It is chiefly by discounting bills of exchange, that is, by ad-
vancing money upon them before they are due, that the greater part
of banks and bankers issue their promissory notes. They deduct
always, upon whatever sum they advance, the legal interest till the
bill shall become due. The payment of the bill, when it becomes
due, replaces to the bank the value of what had been advanced,
together with a clear profit of the interest. The banker who ad-
vances to the merchant whose bill he discounts, not gold and silver,
but his own promissory notes, has the advantage of being able to
discount to a greater amount, by the whole value of his promissory
notes, which he finds, by experience, are commonly in circulation.
He is thereby enabled to make his clear gain of interest on so much
a larger sum.

The commerce of Scotland, which at present is not very great,
was still more inconsiderable when the two first banking companies
were established ; and those companies would have had but little
trade, had they confined their business to the discounting of bills of
exchange. They invented, therefore, another method of issuing
their promissory notes; by granting, what they called, cash
accounts, that is, by giving credit to the extent of a certain sum
(two or three thousand pounds, for example), to any individual who
could procure two persons of undoubted credit and good landed
estate to become surety for him, that whatever money should be
advanced to him, within the sum for which the credit had been
given, should be repaid upon demand, together with the legal
interest. Credits of this kind arc, I believe, commonly granted by
banks and bankers in all different parts of the world. But the easy
terms upon which the Scotch banking companies accept of repay-
ment are, so far as I know, peculiar to them, and have, perhaps,
been the principal cause, both of the great trade of those companies,
and of the benefit which the country has received from it.

Whoever has a credit of this kind with one of those companies,
and borrows a thousand pounds upon it, for example, may repay

THE NATURE AJfD CAUSES OF BOOK n.

+

this sum piecemeal, by twenty und thirty pounds at a time, the
company discounting a proportionable part -of the interest of the
great sum from the day on which each of those small sums is paid
in, till the whole be in this manner repaid. All merchants, there-
fore, and almost all men of business, find it convenient to keep such
cash accounts with them, and are thereby interested to promote the
trade of those companies, by readily receiving their notes in all
payments, and by encouraging all those with whom they have any
influence to do the same. The banks, when their customers apply
to them for money, generally advance it to ihem in their own pro-
missory notes. These the merchants pay away to the manufac-
turers for goods, the manufacturers to the farmers for materials and
provisions, the farmers to their landlords for rent, the landlords
repay them to the merchants for the conveniences and luxuries with
which they supply them, and the merchants again return them to
the banks in order to balance their cash accounts, or to replace what
they may have borrowed of them; and thus almost the whole
money business of the country is transacted by means of them.
Hence the great trade of those companies.

By means of those cash accounts every merchant can, without
imprudence, carry on a greater trade than he otherwise could do.
If there are two merchants, one in London, and the other in Edin-
burgh, who employ equal stocks in the same branch of trade, the
Edinburgh merchant can, without imprudence, carry on a greater
trade, and give employment to a greater number of people than the
London merchant. The London merchant must always keep by
him a considerable sum of money, either in his own coffers, or
in those of his banker, who gives him no interest for it, in order to
answer the demands continually coming upon him for payment of
the goods which he purchases upon credit. 1 Let the ordinary
amount of this sum be supposed five hundred pounds. The value
of the goods in his warehouse must always be less by five hundred
pounds than it would have been, had he not been obliged to keep

1 It js almost unnecessary to say that share of the current rate of discount
the custom of London bankers, with the charged on negotiating securities. Nor
exception of the Bank of England, has is the peculiarity which Adam Smith
been materially modified since the time alluded to, as characterising Scotch bank-
in which Smith wrote. London mer- ing, unknown to English bankers, though
chants keep little or no money in their it is not (perhaps unfortunately) formally
own coffers, and the banks encourage recognised,
deposits, by offering the depositors a largo

CHAP. ii. THE WEALTH. OF NATIONS. 299

such a sum unemployed. Let us suppose that he generally dis-
poses of his whole stock upon hand, or of goods to the value of his
whole stock upon hand, once in the year. By being obliged to
keep so great a sum unemployed, he must sell in a year five
hundred pounds worth less goods than he might otherwise have
done. His annual profits must be less by all that he could have
made by the sale of five hundred pounds worth more goods ; and the
number of people employed in preparing his goods for the market,
must be less by all those that five hundred pounds more stock
could have employed. The merchant in Edinburgh, on the other
hand, keeps no money unemployed for answering such occasional
demands. When they actually come upon him, he satisfies them
from his cash account with the bank, and gradually replaces the
sum borrowed with the money or paper which comes in from the
occasional sales of his goods. With the same stock, therefore, he
can, without imprudence, have at all times in his warehouse a
larger quantity of goods than the London merchant; and can
thereby both make a greater profit himself, and give constant
employment to a greater number of industrious people who prepare
those goods for the market. Hence the great benefit which the
country has derived from this trade.

The facility of discounting bills of exchange, it may be thought,
indeed, gives the English merchants a conveniency equivalent to the
cash accounts of the Scotch merchants. But the Scotch merchants,
it must be remembered, can discount their bills of exchange as easily
as the English merchants ; and have, besides, the additional con-
veniency of their cash accounts. 1

The whole paper money of every kind which can easily circulate
in any country never can exceed the value of the gold and silver, of
which it supplies the place, or which (the commerce being supposed
the same) would circulate there, if there was no paper money. _ If

1 Adam Smith speaka of the advantages so much r\ the other, it is difficult to see

derived by merchants from the superiority in what the advantage consists. If the

t>f the Scotch mode of affording aecom- whole circulation will hear only one

modation to trade, over the English mode, million of paper, one million only will

by means of cash accounts. These cash be circulated ; and it can be of no real

accounts are credits given by the Scotch importance either to the banker or

banker to his customers, in addition to merchant, whether the whole be issued

the bills which he discounts for them ; in discounting bills or a part be issued,

but as the banker, in proportion as he and the remainder be issued by means o

advances money and sends it into circula- these cash accounts. Ricardo'a Political

tion in one way, is debarred from issuing Economy, ch. xxvii.

300 THE NATURE AND CAUSES OF BOOK 11.

twenty shilling notes, for example, are the lowest paper money
current in Scotland, the whole of that currency which can easily
circulate there cannot exceed the sum of gold and silver, which
would be necessary for transacting the annual exchanges of twenty
shillings value and upwards usually transacted within that country.
Should the circulating 1 paper at any time exceed that sum, as the
excess could neither be sent abroad nor be employed in the circula-
tion of the country, it mast immediately return upon the banks to
be exchanged for gold and silver. Many people would immediately
perceive that they had more of this paper than was necessary for
transacting their business at home, and as they could not send it
abroad, they would immediately demand payment of it from the
banks. When this superfluous paper was converted into gold and
silver, they could easily find a use for it by sending it abroad ; but
they could (hid none while it remained in the shape of paper. There
would immediately, therefore, be a run upon the banks to the whole
extent of this superfluous paper, and, if they showed any difficulty
or backwardness in payment, to a much greater extent ; the alarm,
which this would occasion, necessarily increasing the run.

Over and above the expenses which are common to every branch
of trade ; such as the expense of house rent, the wages of servants,
clerks, accountants, &c.j the expenses peculiar to a bank consist
chiefly in two articles : First, in the expense of keeping at all times
in its coffers, for answering the occasional demands of the holders of
its notes, a large sum of money, of which it loses the interest ; and,
secondly, in the expense of replenishing those coffers as fast as they
are emptied by answering such occasional demands.

A banking company, which issues more paper than can be em-
ployed in the circulation of the country, and of which the excess is
continually returning upon them for payment, ought to increase the
quantity of gold and silver, which they keep at all times in their
coffers, not only in proportion to this excessive increase of their
circulation, but in a much greater proportion ; their notes returning
upon them much faster than in proportion to the excess of their
quantity. Such a company, therefore, ought to increase the first
article of their expense, not only in proportion to this forced increase
of their business, but in a much greater proportion.

The coffers of such a company too, though they ought to be filled
much fuller, yet must empty themselves much faster than if their

CHAP. ii. THE WEALTH OF NATIONS. 301

business was confined within more reasonable bounds, and must
require, not only a more violent, but a more constant and uninter-
rupted exertion of expense in order to replenish them. The coin
too, which is thus continually drawn in such large quantities from
their coffers, cannot be employed in the circulation of the country.
It comes in place of a paper which is over and above what can be
employed in that circulation, and is therefore over and above what
can be employed in it too. But as that coin will not be allowed to lie
idle, it must, in one shape or another, be sent abroad, in order to find
that profitable employment which it cannot find at home ; and this
continual exportation of gold and silver, by enhancing the difficulty,
must necessarily enhance still further the expense of the bank, in
finding new gold and silver in order to replenish those coffers, which
empty themselves so very rapidly. Such a company, therefore,
must, in proportion to this forced increase of their business, increase
the second article of their expense still more than the first.

Let us suppose that all the paper of a particular bank, which the
circulation of the country can easily absorb and employ, amounts
exactly to forty thousand pounds ; and that for answering occasional
demands, this bank is obliged to keep at all times in its coffers ten
thousand pounds in gold and silver. Should this bank attempt to
circulate forty-four thousand pounds, the four thousand pounds
which are over and above what the circulation can easily absorb
and employ, will return upon it almost as fast as they are issued.
For answering occasional demands, therefore, this bank ought to^
keep at all times in its coffers, not eleven thousand pounds only,
but fourteen thousand pounds. It will thus gain nothing by the
interest of the four thousand pounds excessive circulation ; and it
will lose the whole expense of continually collecting four thousand
pounds in gold and silver, which will be continually going out of
its coffers as fast as they are brought into them.

Had every particular banking company always understood and
attended to its own particular interest, the circulation never could
have been overstocked with paper money. But every particular
banking company has not always understood or attended to its own
particular interest, and the circulation has frequently been over-
stocked with paper money.

By issuing too great a quantity of paper, of which the excess
was continually returning, in order to be exchanged for gold and

302 THE NATURE AND CAUSES OF BOOK n.

silver, the Bank of England was for many years- together obliged to
coin gold to the extent of between eight hundred thousand pounds
and a million a year ; or at an average, about eight hundred and
fifty thousand pounds. For this great coinage the Bank (in con-
sequence of the worn and degraded state into which the gold coin
had fallen a few years ago) was frequently obliged to purchase gold
bullion at the high price of four pounds an ounce, which it soon after
issued in coin at $ T js. io^d. an ounce, losing in this manner between
two and a half and three per cent, upon the coinage of so very large a
sum. Though the Bank therefore paid no seignorage, though the Go-
vernment was properly at the expense of the coinage, this liberality of
Government did not prevent altogether the expense of the Bank. 1

The Scotch banks, in* consequence of an excess of the same kind,
were all obliged to employ constantly agents at London to collect
money for them, at an expense which was seldom below one and a
half or two per cent. This money was sent down by the waggon,
and insured by the carriers at an additional expense of three quarters
per cent., or fifteen shillings on the hundred pounds. Those agents
were not always able to replenish the coffers of their employers so
fast as they were emptied. In this case, the resource of the banks
was to draw upon their correspondents in London bills of exchange
to the extent of the sum which they wanted. When those corre-
spondents afterwards drew upon them for the payment of this sum,
together with the interest and a commission, some of those banks,
from the distress into which their excessive circulation had thrown
them, had sometimes no other means of satisfying this draught but
by drawing a second set of bills either upon the same, or upon some
other correspondents in London ; and the same sum, or rather bills
for the same sum, would in this manner make sometimes more than
two or three journeys ; the debtor, bank, paying always the interest
and commission upon the whole accumulated sum. Even those
Scotch banks which never distinguished themselves by their extreme
imprudence, were sometimes obliged to employ this ruinous resource.

The gold coin which was paid out either by the Bank of England,
or by the Scotch banks, in exchange for that part of their paper
which was over and above what could be employed in the circulation
of the country, being likewise over and above what could be em-
ployed in that circulation, was sometimes sent abroad in the shape
1 See Ricardo's Political Economy, chap, xxvij.

CHAP. IT. THE WEALTH OF NATIONS." 303

of coin, sometimes melted down and sent abroad in the shape of
bullion, and sometimes melted down and sold to the Bank of Eng-
land at the high price of four pounds an ounce. It was the newest,
the heaviest, and the best pieces only which were carefully picked
out of the whole coin, and either sent abroad or melted down. At
home, and while they remained in the shape of coin, those heavy
pieces were of no more value than the light ; but they were of more
value abroad, or when melted down into bullion, at home. The
Bank of England, notwithstanding theii? great annual coinage,
found to their astonishment, that there was every year the same
scarcity of coin, as there had been the year before ; and that not-
withstanding the great quantity of good and new coin which was
every year issued from the Bank, the state of the coin, instead of
growing better and better, became every year worse and worse.
Every year they found themselves under the necessity of coining
nearly the same quantity of gold as they had coined the year
before, and from the continual rise in the price of gold bullion, in
consequence of the continual wearing and clipping of the coin, the
expense of this great annual coinage became every year greater and
greater. The Bank of England, it is to be observed, by supplying
its own coffers with coin, is indirectly obliged to supply the whole
kingdom, into which coin i& continually flowing from those coffers
in a great variety of ways. Whatever coin therefore was wanted to
support this excessive circulation both of Scotch and English paper
money, whatever vacuities this excessive circulation occasioned in
the necessary coin of the kingdom, the Bank of England was
obliged to supply them. The Scotch banks, no doubt, paid all
of them very dearly for their own imprudence and inattention.
But the Bank of England paid very dearly, not only for its own
imprudence, but for the much greater imprudence of almost all
the Scotch banks.

The over-trading of some bold projectors in both parts of the
United Kingdom was the original cause of this excessive circulation
of paper money.

What a bank can with propriety advance to a merchant or under-
taker of any kind, is not, either the whole capital with which he
trades, or even any considerable part of that capital ; but that part
of it only, which he would otherwise be obliged to keep by him
unemployed, and in ready money for answering occasional demands.

304 THE NATURE AND CAUSES OF BOOK n.

If the paper money which the bank advances never exceeds this
value, it can never exceed the value of the gold and silver, which
would necessarily circulate in the country if there was no paper
money; it can never exceed the quantity which the circulation
of the country can easily absorb and employ.

When a bank discounts to a merchant a real bill of exchange
drawn by a real creditor upon a real debtor, and which, as soon as
it becomes due, is really paid by that debtor, it only advances
to him a part of the value which he would otherwise be obliged to
keep by Mm unemployed, and in ready money for answering occa-
sional demands. The payment of the bill, when it becomes due,
replaces to the bank the value of what it had advanced, together
with the interest. The coffers of the bank, so far as its dealings
are confined to such customers, resemble a water pond, from which,
though a stream is constantly running out, yet another is con-
tinually running in, fully equal to that which runs out ; so that,
without any further care or attention, the pond keep always equally,
or very near equally full. Little or no expense can ever be necessary
for replenishing the coffers of such a bank.

A merchant, without over-trading, may frequently have occasion
for a sum of ready money, even when he has no bills to discount.
When a bank, besides discounting his bills, advances him likewise
upon such occasions, such sums upon his cash account, and accepts
of a piecemeal repayment as the money comes in from the occasional
sale of his goods, upon the easy terms of the banking companies of
Scotland, it dispenses him entirely from the necessity of keeping
any part of his stock by him unemployed, and in ready money for
answering occasional demands. When such demands actually come
upon him, he can answer them sufficiently from his cash account.
The bank, however, in dealing with such customers, ought to
observe with great attention, whether in the course of some short
period (of four, five, six, or eight months, for example) the sum
of the repayments which it commonly receives from them, is, or is
not, fully equal to that of the advances which it commonly makes
to them. If, within the course of such short periods, the sum of
the repayments from certain customers is, upon most occasions,
fully equal to that of the advances, it may safely continue to deal
with such customers. Though the stream which is in this case
continually running out from its .coffers may be very large, that

CHAP. ii. THE WEALTH OF NATIONS. 305

which is continually running into them must be at least equally
large ; so that without any further care or attention those coffers
are likely to be always equally or very near equally full, and scarce
ever to require any extraordinary expense to replenish them. If, on
the contrary, the sum of the repayments from certain other cus-
tomers falls commonly very much short of the advances which
it makes to them, it cannot with any safety continue to deal with
such customers, at least if they continue to deal with it in this
manner. The stream which is in this case continually running out
from its coffers is necessarily much larger than that which is
continually running in ; so that, unless they are replenished by
some great and continual effort of expense, those coffers must soon,
be exhausted altogether.

The banking companies of Scotland, accordingly, were for a long
time very careful to require frequent and regular repayments from
all their customers, and did not care to deal with any person,
whatever might be his fortune or credit, who did not make, what
they called, frequent and regular operations with them. By this
attention, besides saving almost entirely the extraordinary expense
of replenishing their coffers, they gained two other very considerable
advantages.

First, by this attention they were enabled to make some tolerable
judgment concerning the thriving or declining circumstances of
their debtors, without being obliged to look out for any other
evidence besides what their own books afforded them ; men being
for the most part either regular or irregular in their repayments,
according as their circumstances are either thriving or declining.
A private man who lends out his money to perhaps half-a-dozen or
a dozen of debtors, may, either by himself or his agents, observe
and inquire both constantly and carefully into the conduct and
situation of each of them. But a banking company, which lends
money to perhaps live hundred different people, and of which the
attention is continually occupied by objects oi a very different kind,
can have no regular information concerning the conduct and circum-
stances of the greater part of its debtors beyond what its own books
afford it. In requiring frequent and regular payments from all
their customers, the banking companies of Scotland had probably
this advantage in view.

Secondly, by this attention they secured themselves from the

VOL. I. X

306 THE NATURE AND CAUSES OF BOOK IT.

possibility of issuing more paper money than what the circulation
of the country could easily absorb and employ. When they
observed, that within moderate periods of time the repayments
of a particular customer were upon most occasions fully equal to the
advances which they had made to him, they might be assured that
the paper money which they had advanced to him, had not at any
time exceeded the quantity of gold and silver which he would other-
wise have been obliged to keep by him for answering occasional
demands; and that, consequently, the paper money, which they
had circulated by his means, had not at any time exceeded the
quantify of gold and silver which would have circulated in the
country, had there been no paper money. The frequency, regu-
larity, and amount of his repayments would sufficiently demonstrate
that the amount of their advances had at no time exceeded that
part of his capital which he would otherwise have been obliged to
keep by him, unemployed and in ready money, for answering occa-
sional demands ; that is, for the purpose of keeping the rest of his
capital in constant employment. It is this part of his capital only
which, within moderate periods of time, is continually returning
to every dealer in the shape of money, whether paper or coin, and
continually going from him in the same shape. If the advances of
the bank had commonly exceeded this part of his capital, the ordi-
nary amount of his repayments could not, within moderate periods
of time, have equalled the ordinary amount of its advances. The
stream which, by means of his dealings, was continually running
into the coffers of the bank, could not have been equal to the stream
which, by means of the same dealings, was continually running
out. The advances of the bank paper, by exceeding the quantity of
#old and silver which, had there been no such advances, he would
have been obliged to keep by him for answering occasional demands,
might soon come to exceed the whole quantity of gold and
silver which (the commerce being supposed the same) would have
circulated in the country had there been no paper money; and con*
-sequently to exceed the quantity which the circulation of the country
could easily absorb and employ; and the excess of this paper money
would immediately have returned upon the bank in order to be
exchanged for gold and silver. This second advantage, though
equally real, was not perhaps so well understood by all the different
banking companies of Scotland as the first.

CHAP. n. THE WEALTH OF NATIONS. 307

When, partly by the conveniency of discounting bills, and partly
by that of cash accounts, the creditable traders of any country can
be dispensed from the necessity of keeping any part of their stock
by them, unemployed and in ready money, for answering occasional
demands, they can reasonably expect no further assistance from
banks and bankers, who, when they have gone thus far, cannot,
consistently with their own interest and safety, go farther. A
bank cannot, consistently with its own interest, advance to a trader
the whole or even the greater part of the circulating capital with
which he trades ; because, though that capital is continually re-
turning to him in the shape of money, and going from him in the
same shape, yet the whole of the returns is too distant from the
whole of the outgoings, and the sum of his repayments could not
equal the sum of its advances within such moderate periods of time
as suit the conveniency of a bank. Still less could a bank afford to
advance him any considerable part of his fixed capital; of the
capital which the undertaker of an iron forge, for example, employs
in erecting his forge and smelting-house, his work-houses and
warehouses, the dwelling-houses of his workmen, &c. ; of the capital
which the undertaker of a mine employs in sinking his shafts,
in erecting engines for drawing out the water, in making roads
and waggon-ways, &c. ; of the capital which the person who under-
takes to improve land employs in clearing, draining, enclosing,
manuring and ploughing waste and uncultivated fields, in building
farm-houses, with all their necessary appendages of stables,
granaries, &c. The returns of the fixed capital are in almost all
cases much slower than those of the circulating capital ; and such
expenses, even when laid out with the greatest prudence and judg-
ment, very seldom return to the undertaker till after a period of
many years, a period by far too distant to suit the conveniency of a
bank. Traders and other undertakers may, no doubt, with great
propriety, carry on a very considerable part of their projects with
borrowed money. Injustice to their creditors, however, their own
capital ought, in this case, to be sufficient to ensure, if I may
say so, the capital of those creditors ; or to render it extremely
improbable that those creditors should incur any loss, even though
the success of the project should fall very much short of the expec-
tation of the projectors. Even with this precaution too, the money
which is borrowed, and which it is meant should not be repaid till

308 THE NATURE AND CAUSES OF BOOK IT.

after a period of several years, ought not to be borrowed of a bank,
but ought to be borrowed upon bond or mortgage, of such private
people as propose to live upon the interest of their money, without
taking the trouble themselves to employ the capital, and who are
upon that account willing to lend that capital to such people of
good credit as are likely to keep it for several years. A bank,
indeed, which lends its money without the expense of stamped paper,
or of attornies 3 fees for drawing bonds and mortgages, and which
accepts of repayment upon the easy terms of the banking companies
of Scotland, would, no doubt, be a very convenient creditor to such
traders and undertakers. But such traders and undertakers would,
surely, be most inconvenient debtors to such a bank.

It is now more than five-and-twenty years since the paper money
issued by the different banking companies of Scotland was fully
equal, or rather was somewhat more than fully equal, to what the
circulation of the country could easily absorb and employ. Those
companies, therefore, had so long ago given all the assistance to
the traders and other undertakers of Scotland which it is possible
for banks and bankers, consistently with their own interest, to give.
They had even done somewhat more. They had over-traded a
little, and had brought upon themselves that loss, or at least that
diminution of profit, which in this particular business never fails to
attend the smallest degree of over-trading. Those traders and
other undertakers, having got so much assistance from banks and
bankers, wished to get still more. The banks, they seem to have
thought, could extend their credit to whatever sum might be
wanted, without incurring any other expense besides that of a few
reams of paper. They complained of the contracted views and
dastardly spirit of the directors of those banks, which did not, they
said, extend their credits in proportion to the extension of the trade
of the country; meaning, no doubt, by the extension of that trade
the extension of their own projects beyond what they could carry
on, either with their own capital, or with what they had credit to
borrow of private people in the usual way of bond or mortgage.
The banks, they seem to have thought, were in honour bound
to supply the deficiency, and to provide them with all the capital
which they wanted to trade with. The banks, however, were
of a different opinion, and upon their refusing to extend their
credits, some of those traders had recourse to an expedient which.

CHAP. ii. THE WEALTH OF NATIONS. 309

for a time, served their purpose, though at a much greater expense,
yet as effectually as the utmost extension of bank credits could have
done. This expedient was no other than the well-known shift
of drawing and re-drawing ; the shift to which unfortunate traders
have sometimes recourse when they are upon the brink of bank-
ruptcy. The practice of raising money in this manner had been
long known in England, and during the course of the late war,
when the high profits of trade afforded a great temptation to
over-trading, is said to have been carried on to a very great extent.
From England it was brought into Scotland, where, in proportion
to the very limited commerce, and to the very moderate capital
of the country, it was soon carried on to a much greater extent than
it ever had been in England.

The practice of drawing and re-drawing is so well known to
all men of business, that it may perhaps be thought unnecessary to
give any account of it. But as this book may come into the hands
of many people who are not men of business, and as the effects
of this practice upon the banking trade are not perhaps generally
understood even by men of business themselves, I shall endeavour
to explain it as distinctly as I can.

The customs of merchants, which were established when the
barbarous laws of Europe did not enforce the performance of their
contracts, and which during the course of the two last centuries
have been adopted into the laws of all European nations, have given
such extraordinary privileges to bills of exchange, that money is
more readily advanced upon them than upon any other species of
obligation j especially when they are made payable within so short
a period as two or three months after their date. If, when the bill
becomes due, the acceptor does not pay it as soon as it is presented,
he becomes from that moment a bankrupt. The bill is protested,
and returns upon the drawer, who, if he does not immediately pay it,
becomes likewise a bankrupt. If, before it came to the person who
presents it to the acceptor for payment, it had passed through the
hands of several other persons, who had successively advanced to one
another the contents of it either in money or goods, and who, to
express that each of them had in his turn received those contents,
had all of them in their order endorsed, that is, written their names
upon the back of the bill , each endorser becomes in his turn liable
to the owner of the bill for those contents, and, if he fails to pay, he

310 THE NATURE AND CAUSES OF BOOK 11.

becomes too from that moment a bankrupt. Though the drawer,
acceptor, and endorsers of the bill should, all of them, be persons of
doubtful credit ; yet still the shortness of the date gives some
security to the owner of the bill. Though all of them may be
very likely to become bankrupts, it is a chance if they all be-
come so in so short a time. The house is crazy, says a weary
traveller to himself, and will not stand very long ; but it is a
chance if it falls to-night, and I will venture, therefore, to sleep in
it to-night.

The trader A in Edinburgh, we shall suppose, draws a bill upon
B in 'London, payable two months after date. In reality, B in
London owes nothing to A in Edinburgh ; but he agrees to accept
of A's bill, upon condition that before the term of payment he shall
redraw upon A in Edinburgh, for the same sum, together with the
interest and a commission, another bill, payable likewise two months
after date. B accordingly, before the expiration of the first two
months, re-dra\\ s this bill upon A in Edinburgh ; who again, before
the expiration of the second two months, draws a second bill upon
B in London, payable likewise two months after date ; and before
the expiration of the third two months, B in London re-draws upon
A in Edinburgh another bill, payable also two months after date.
This practice has sometimes gone on, not only for several months,
but for several years together, the bill always returning upon A in
Edinburgh, with the accumulated interest and commission of all the
former bills. The interest was five per cent, in the year, and the
commission was never less than one-half per cent, on each draught.
This commission being repeated more than six times in the year,
whatever money A might raise by this expedient must necessarily
have cost him something more than eight per cent, in the year, and
sometimes a great deal more ; when either the price of the com-
mission happened to rise, or when he was obliged to pay compound
interest upon the interest and commission of former bills. This
practice was called raising money by circulation.

In a country where the ordinary profits of stock in the greater
part of mercantile projects are supposed to run between six and ten
per cent., it must have ^been a very fortunate speculation of which
the returns could not only repay the enormous expense at which the
money was thus borrowed for carrying it on, but afford, besides,
a good surplus profit to the projector. Many vast and extensive

CHAP. ii. THE WEALTH OF NATIONS. 311

projects, however, were undertaken, and for several years carried on
without any other fund to support them besides what was raised
at this enormous expense. The projectors, no doubt, had in their
golden dreams the most distinct vision of this great profit. Upon
their awaking, however, either at the end of their projects, or when
they were no longer able to carry them on, they very seldom, I
believe, had the good fortune to find it.*

The bills which A in Edinburgh drew upon B in London, he
regularly discounted two months before they were due with some
bank or banker in Edinburgh ; and the bills which B in London
re-drew upon A in Edinburgh, he as regularly discounted either
with the Bank of England, or with some other bankers in London.
Whatever was advanced upon such circulating bills, was, in Edin-
burgh, advanced in the paper of the Scotch banks, and in London,
when they were discounted at the Bank of England, in the paper of
that bank. Though the bills upon which this paper had been
advanced, were all of them repaid in their turn as soon as they
became due, yet the value which had really been advanced upon
the first bill, was never really returned to the banks which advanced

* The method described in the text for example, in London. This other bill
was by no means either the most common was made payable to the order of B, who,
or the most expensive one in which t^ose upon its being accepted by C, discounted
adventurers sometimes raised money by it with some banker in London ; and A
circulation. It frequently happened that enabled C to discharge it by drawing, a
A in Edinburgh would enable B in few days before it became due, a third
London to pay the first Iflli of exchange bill, likewise at two months' date, some-
by drawing, a few days before it became times upon his first correspondent B, and
due, a second bill at three months' date sometimes upon some fourth or fifth per-
upon the same B in London. This bill, son, D or E, for example. This third bill
being payable to his own order, A sold in was made payable to the order^of C ; who,
Edinburgh at par, arid with its contents as soon as it was accepted, discounted^
purchased bills upon London payable at in the same manner with some banker in
sight to the order of B, to whom'he sent London. Such operations being repeated
them by the post. Towards the end of at least six times in the year, and being
the late war, the exchange between Ediii- loaded with a commission of at least one-
burgh and London was frequently three half per cent, upon each repetition, to-
per cent, against Edinburgh, and those gether with the leg.il interest of five per
bills at sight must frequently have cost cent., this method of raising money, in the
A that premium. This transaction there- same manner as that described in the
fore being repeated at least four times in text, mr ^t have cost A something more
the year, and being loaded with a com- than eight per cent. By saving, how-
mission of at least one-half per cent, upon ever, the exchange between Edinburgh
each repetition, must at that period have and London it waj less expensive than
cost A at least fourteen per cent, in the that mentioned in the foregoing part of
year. At other times A would enable B this note ; but then it required an estab-
to discharge the first bill of exchange by lished credit with more houses than one
drawing, a few days before it became due, in London, an advantage which many of
a second bill at two months' date ; not these adventurers could not always find
upon B, but upon some third person, C, it easy to procure.

312 THE NATURE AND CAUSES OF BOOK n.

it ; because, before each bill became due, another bill was always
drawn to somewhat a greater amount than the bill which was soon
to be paid ; and the discounting of this other bill was essentially
necessary towards the payment of that which was soon to be due.
This payment, therefore, was altogether fictitious. 1 The stream,
which, by means of those circulating bills of exchange, had once
been made to run out from the coffers of the banks, was never
replaced by any stream which really run into them.

The paper which was issued upon those circulating bills of ex-
change amounted, upon many occasions, to the whole fund destined
for carrying on some vast and extensive project of agriculture, com-
merce, or manufactures; and not merely to that part of it which, had
there been no paper money, the projector would have been obliged
to keep by him, unemployed and in ready money for answering
occasional demands. The greater part of this paper was, conse-
quently, over and above the value of the gold and silver which would
have circulated in the country, had there been no paper money. It
was over and above, therefore, what the circulation of the country
could easily absorb and employ, and, upon that account, imme-
diately returned upon the banks in order to be exchanged for gold
and silver, which they were to find as they could. It was a capital
which those projectors had very artfully contrived to draw from
those banks, not only without their knowledge or deliberate consent,
but for some time, perhaps, without their having the most distant
suspicion that they had really advanced it.

When two people, who are continually drawing and re-drawing
upon one another, discount their bills always with the same banker,
he must immediately discover what they are about, and see clearly
that they are trading, not with any capital of their own, but with

1 In modern language, these instru- rally disastrous, are carried on, and have
ments are called Accommodation bills. invariably been found to have played an
They have, as Mr. Mill has observed, a important part in those commercial scan-
primArfacie discredit attached to them, of dais, which seem to occur periodically,
professing to be what they are not, i.e. and with increasing frequency. It may
instruments representing a real transac- be added, that no prudent banker, if
tion. But they also raise the rate of in- he were aware of the nature of these
terest, if the rate be determined by the instruments, would allow them to be
competition of borrowers, against those negotiated over his counter, and that
who engage in bo< 3,-fide transactions, and this is no slight reason for the condemna-
so are naturally open to the disapproba- tion of such transactions, even if no
tion of genuine traders. But besides other argument could be alleged against
this, thuy are the chief means by which them. See Goschen's ' Foreign Ex-
speculations, always dangerous, and gene- changes,' chap. iii.

CHAP. ii. THE WEALTH OF NATIONS. 313

the capital which he advances to them. But this discovery is not
altogether so easy when they discount their bills sometimes with
one banker, and sometimes with another, and when the same two
persons do not constantly draw and re-draw upon one another, but
occasionally run the round of a great circle of projectors, who find
it for their interest to assist one another in this method of raising
money, and to render it, upon that account, as difficult as possible
to distinguish between a real and a fictitious bill of exchange;
between a bill drawn by a real creditor and a real debtor, and a bill
for which there was properly no real creditor but the bank which
discounted it, nor any real debtor but the projector who made use
of the money. When a banker had even made this discovery, he
might sometimes make it too late, and might find that he had
already discounted the bills of those projectors to so great an extent,
that, by refusing to discount any more, he would necessarily make
thorn all bankrupts, and thus, by ruining them, might perhaps ruin
himself. For his own interest and safety, therefore, he might find
it necessary, in this very perilous situation, to go on for some time,
endeavouring, however, to withdraw gradually, and upon that
account making every day greater and greater difficulties about
discounting, in order to force those projectors by degrees to have
recourse, either to other barkers, or to other methods of raising
money; so as that he himself might, as soon as possible, get out of
the circle. The difficulties, accordingly, which the Bank of Eng-
land, which the principal bankers in London, and which even the
more prudent Scotch banks began, after a certain time, and when
all of them had already gone too far, to make about discounting, not
only alarmed, but enraged in the highest degree those projectors.
Their own distress, of which this prudent and necessary reserve of
the banks was, no doubt, the immediate occasion, they called the
distress of the country ; and this distress of the country, they said,
was altogether owing to the ignorance, pusillanimity, and bad con-
duct of the banks, which did not give a sufficiently liberal aid to
the spirited undertakings of those who exerted themselves in order
to beautify, improve, and enrich the country. It was the duty of
the banks, they seemed to think, to lend for as long a time, and to
as great an extent as they might wish to borrow. The banks, how-
ever, by refusing in this manner to give more credit to those, to
whom they had already given a great deal too much, took the only

314 THE NATURE AND CAUSES OF BOOK n.

/

method by which it was now possible to save either their own credit,
or the public credit of the country.

In the midst of this clamour and distress, a new bank was
established in Scotland for the express purpose of relieving the
distress of the country. 1 The design was generous, but the execu-
tion was imprudent, and the nature and causes of the distress which
it meant to relieve were not, perhaps, well understood. This bank
was more liberal than any other had ever been, both in granting
cash accounts, and in discounting bills of exchange. With regard
to the latter, it seems to have made scarce any distinction between
real and circulating bills, but to have discounted all equally. It
was the avowed principle of this bank to advance, upon any reason-
able security, the whole capital which was to be employed in those
improvements of which the returns are the most slow and distant,
such as the improvements of land. To promote such improvements
was even said to be the chief of the public spirited purposes for
which it was instituted. By its liberality in granting cash accounts
and in discounting bills of exchange, it, no doubt, issued great
quantities of its bank-notes. But those bank-notes being, the
greater part of them, over and above what the circulation of the
country could easily absorb and employ, returned upon it, in order
to be exchanged for gold and silver, as fast as they were issued.
Its coffers were never well filled. The capital which had been
subscribed to this bank at two different subscriptions, amounted
to one hundred and sixty thousand pounds, of which eighty per
cent, only was paid up. This sum ought to have been paid in at
several different instalments. A great part of the proprietors,
when they paid in their first instalment, opened a cash account
with the bank, and the directors, thinking themselves obliged to
treat their own proprietors with the same liberality with which
they treated all other men, allowed many of them to borrow upon
this cash account which they paid in upon all their subsequent
instalments. Such payments, therefore, only put into one coffer
what had the moment before been taken out of another ; But had
the coffers of this bank been filled ever so well, its excessive circula-

1 This bank traded under the style of bank were paid in full, though the part-
Douglas, Heron, & Company, beginning ners lost 400,000, Precipitation and
business at Ayr in November 1 769. It Fall of Messrs. Douglas, Heron, & Co.
continued to exist till June 1772, when Edinburgh, 1778,
it stopped payment. The debts of the

CHAP. ii. THE WEALTH OF NATIONS. 315

tion must have emptied them faster than they could have been
replenished by any other expedient but the ruinous one of drawing
upon London, and when the bill became due, paying it, together
with interest and commission, by another draught upon the same
place. Its coffers having been filled so very ill, it is said to have
been driven to this resource within a very few months after it began
to do business. The estates of the proprietors of this bank were
worth several millions, and by their subscription to the original
bond or contract of the bank, were really pledged for answering all
its engagements. By means of the great credit which so great
a pledge necessarily gave it, it was, notwithstanding its too liberal
conduct, enabled to carry on business for more than two years.
When it was obliged to stop, it had in the circulation about two
hundred thousand pounds in bank-notes. In order to support the
circulation of those notes, which were continually returning upon it
as fast as they were issued, it had been constantly in the practice of
drawing bills of exchange upon London, of which the number and
value were continually increasing, and, when it stopped, amounted to
upwards of six hundred thousand pounds. This bank, therefore, had,
in little more than the course of two years, advanced to different
people upwards of eight hundred thousand pounds at five per cent.
Upon the two hundred thousand pounds which it circulated in bank-
notes, this five per cent, might, perhaps, be considered as clear gain,
without any other deduction besides the expense of management.
But upon upwards of six hundred thousand pounds, for which it was
continually drawing bills of exchange upon London, it was paying,
in the way of interest and commission, upwards of eight per cent.,
and was consequently losing more than three per cent, upon more
than three-fourths of all its dealings.

The operations of this bank seem to have produced effects quite
opposite to those which were intended by the particular persons
who planned and directed it. They seem to have intended to
support the spirited undertakings, for as such they considered them,
which were at that time carrying on in different parts of the
country; and at the same time, by drawing the whole banking
business to themselves, to supplant all the other Scotch banks,
particularly those established at Edinburgh, whose backwardness in
discounting bills of exchange had given some offence. This bank,
no doubt, gave some temporary relief to those projectors, and

316 THE NATURE AND CAUSES OF BOOK n.

enabled them to carry on their projects for about two years longer
than they could otherwise have done. But it thereby only enabled
them to get so much deeper into debt, so that, when ruin came, it
fell so much the heavier both upon them and upon their creditors.
The operations of this bank, therefore, instead of relieving, in
reality aggravated in the long-run the distress which those pro-
jectors had brought both upon themselves and upon their country.
It would have been much better for themselves, their creditors
and their country, had the greater part of them been obliged to
stop two years sooner than they actually did. The temporary
relief, however, which this bank afforded to those projectors,
proved a real and permanent relief to the other Scotch banks.
All the dealers in circulating bills of exchange, which those other
banks had become so backward in discounting, had recourse to this
new bank, where they were received with open arms. Those other
banks, therefore, were enabled to get very easily out of that fatal
circle, from which they could not otherwise have disengaged them-
selves without incurring a considerable loss, and perhaps too even
some degree of discredit,

In the long-run, therefore, the operations of this bank increased
the real distress of the country which it meant to relieve, and
effectually relieved from a very great distress those rivals whom
it meant to supplant.

At the first setting out of this bank, it was the opinion of some
people, that how fast soever its coffers might be emptied, it might
easily replenish them by raising money upon the security of those
to whom it had advanced its paper. Experience, I believe, soon
convinced them that this method of raising money was by much
too slow to answer their purpose ; and that coffers which originally
were so ill filled, and which emptied themselves so very fast, could
be replenished by no other expedient but the ruinous one of drawing
bills upon London, and when they became due, paying them by
other draughts upon the same place with accumulated interest and
commission. But though they had been able by this method to
raise money as fast as they wanted it, yet, instead of making a
profit, they must have suffered a loss by every such operation ; so
that in the long-run they must have ruined themselves as a
mercantile company, though, perhaps, not so soon as by the more
expensive practice of drawing and re-drawing. They could still have

CHAP. ii. THE WEALTH OF NATIONS. 317

made nothing by the interest of the paper, which, being over and
above what the circulation of the country could absorb and employ,
returned upon them, in order to be exchanged for gold and silver,
as fast as they issued it, and for the payment of which they were
themselves continually obliged to borrow money. On the contrary,
the whole expense of this borrowing, of employing agents to look
out for people who had money to lend, of negotiating with those
people, and of drawing the proper bond or assignment, must have
fallen upon them, and have been so much clear loss upon the balance
of their accounts. The project of replenishing their coffers in this
manner may be compared to that of a man who had a water-pond
from which a stream was continually running out, and into which
no stream was continually running, but who proposed to keep it
always equally full by employing a number of people to go con-
tinually with buckets to a well at some miles distance in order to
bring water to replenish it.

But though this operation had proved, not only practicable but
profitable to the bank as a mercantile company, yet the country
could have derived no benefit from it ; but, on the contrary, must
have suffered a very considerable loss by it. This operation could
not augment in the smallest degree the quantity of money to be
lent. It could only have erected this bank into a sort of general
loan office for the whole country. Those who wanted to borrow
must have applied to this bank instead of applying to the private
persons who had lent it their money. But a bank which lends
money, perhaps, to five hundred different people, the greater part of
whom its directors can know very little about, is not likely to be
more jiidicious in the choice of its debtors than a private person
who lends out his money among a few people whom he knows, and
in whose sober and frugal conduct he thinks he has good reason to
confide. The debtors of such a bank as that whose conduct I have
been giving some account of, were likely, the greater part of them,
to be chimerical projectors, the drawers and re-drawers of circulating
bills of exchange, who would employ the money in extravagant
undertakings, which, with all the assistance that could be given
them, they would probably never be able to complete, and which, if
they should be completed, would never jepay the expense which
they had really cost, would never afford a fund capable of main-
taining a quantity of labour equal to that which had been employed

318 THE NATURE AND CAUSES OF BOOK n,

about them. The sober and frugal debtors of private persons, on
the contrary, would be more likely to employ the money borrowed
in sober undertakings which were proportioned to their capitals,
and which, though they might have less of the grand and the
marvellous, would have more of the solid and the profitable, which
would repay with a large profit whatever had been laid out upon
them, and which would thus afford a fund capable of maintaining
a much greater quantity of labour than that which had been
employed about them. The success of this operation, therefore,
without increasing in the smallest degree the capital of the country,
woujd only have transferred a great part of it from prudent and
profitable to imprudent and unprofitable undertakings.

That the industry of Scotland languished for want of money to
employ it, was the opinion of the famous Mr. Law. By establish-
ing a bank of a particular kind, which he seems to have imagined
might issue paper to the amount of the whole value of all the lands
in the country, he proposed to remedy this want of money. The
Parliament of Scotland, when he first proposed his project, did not
think proper to adopt it. It was afterwards adopted, with some
variations, by the Duke of Orleans, at that time Regent of France.
The idea of the possibility of multiplying paper money to almost
any extent, was the real foundation of what is called the Mississippi
scheme, the most extravagant project both of banking and stock-
jobbing that perhaps the world ever saw. The different operations
of this scheme are explained so fully, so clearly, and with so much
order and distinctness, by Mr. Du Verney, 1 in his Examination of
the Political Reflections upon Commerce and Finances of Mr. Du
Tot, 2 that I shall not give any account of them. The principles
upon which it was founded are explained by Mr. Law himself in
a discourse concerning money and trade, which he published in
Scotland when he first proposed his project. The splendid but
visionary ideas which are set forth in that and some other works
upon the same principles, still continue to make an impression upon
many people, and have, perhaps, in part, contributed to that excess
of banking, which has of late been complained of both in Scotland
and in other places.

1 Examen du Livre Intitule Reflexions 2 Reflexions Politiques sur lea Finances
Politiques sur lea Finances et le Com- et le Commerce. La Haye, 1 754.
merce. La Haye, 1 740.

CHAP. ii. THE WEALTH OF NATIONS. 319

The Bank of England is the greatest bank of circulation in
Europe. It was incorporated in pursuance of an Act of Parliament
by a charter under the Great Seal, dated the 27th of July, 1694.
It at that time advanced to Government the sum of , one million two
hundred thousand pounds, for an annuity of one hundred thousand
pounds ; or for ^96,000 a year interest, at the rate of eight per
cent., and =3^4000 a year for the expense of management. The
credit of the new Government, established by the Revolution, we
may believe, must have been very low, when it was obliged to
borrow at so high an interest.

In 1697 the Bank was allowed to enlarge its capital stock by an
cngraftment of ^1,001,171 10$. Its whole capital stock, therefore,
amounted at this time to ^2,201, 171 IQS. This engraftment is
said to have been for the support of public credit. In 1696, tallies
had been at forty, and fifty, and sixty per cent, discount, and bank
notes at twenty per cent.*" During the great re-coinage of the
silver, which was going on at this time, the Bank had thought
proper to discontinue the payment of its notes, which necessarily
occasioned their discredit.

In pursuance of the 7th Anne, c. vii. the Bank advanced and
paid into the Exchequer, the sum of ^400,000 ; making in all the
sum of j J i, 600,000 which it had advanced upon its original annuity
of ^'96,000 interest and ^4000 for expense of management. In
1708, therefore, the credit of Government was as good as that of
private persons, since it could borrow at six per cent, interest, the
common legal and market rate of those times. In pursuance of the
same Act, the Bank cancelled Exchequer bills to the amount of
^1,775,027 17$. io\d. at six per cent, interest, and was at the
same time allowed to take in subscriptions for doubling its capital.
In 1708, therefore, the capital of the Bank amounted to ^4,402,343 ;
and it had advanced to Government the sum of ^3,375,027 17$. io\d.

By a call of fifteen per cent, in 1 709, there was paid in and made
stock ^656,204 is. yd. ; and by another of ten per cent, in 1710,
^501,448 125. nd. In consequence 01 those two calls, therefore,
the Bank capital amounted to ^5,559)995 X 4*- 8rf.

In pursuance of the 3rd George I, c. 8, the Bank delivered up

two millions of Exchequer bills to be cancelled. It had at this

time, therefore, advanced to Government ^ > 5>375> O2 7 J 7*'

* James Postlethwaite's History of the Public Revenue, p. 301.

320 THE NATURE AND CAUSES OF BOOK n.

In pursuance of the 8th George I, c. ai, the Bank purchased of
the South Sea Company, stock to the amount of ^4,000,000;
and in 1722, in consequence of the subscriptions which it had
taken in for enabling it to make this purchase, its capital stock
was increased by ^3,400,000. At this time, therefore, the Bank
had advanced to the public ^9,375,027 17$. io\d., and its capital
stock amounted only to ^8,959,995 145. 8d. It was upon this
occasion that the sum which the Bank had advanced to the public,
and for which it received interest, began first to exceed its capital
stock, or the sum for which it paid a dividend to the proprietors
of Bank stock ; or, in other words, that the Bank began to have
an undivided capital, over and above its divided one. It has con-
tinued to have an undivided capital of the same kind ever since.
In 1746, the Bank had, upon different occasions, advanced to the
public ^11,686,800, and its divided capital had been raised by
different calls and subscriptions to ^ 10,7 80,000. The state of
those two sums has continued to be the same ever since. In pur-
suance of the 4th of George III, c. 25, the Bank agreed to pay to
Government for the renewal of its charter j J i 10,000, without in-
terest or repayment. This sum, therefore, did not increase either
of those two other sums. 1

The dividend of the Bank has varied according to the variations
in the rate of interest which it has, at different times, received
for the money it had advanced to the public, as well as according
to other circumstances. This rate of interest has gradually been
reduced from eight to three per cent. For some years past the
Bank dividend has been at five and a half per cent.

The stability of the Bank of England is equal to that of the
British Government. All that it has advanced to the public must
be lost before its creditors can sustain any loss. No other banking
company in England can be established by Act of Parliament, or
can consist of more than six members. It acts, not only as an
ordinary bank, but as a great engine of State. It receives and

1 In 1800, the Bank lent the Govern- has been paid off, and the total debt due

ment 3,000,000 without interest, for six is 11,015,100, exclusive of such public

years, and the charter was prolonged to securities as the Bank may purchase on

1833. I n J 8o7 the loan was continued, its own account, and on which, up to

also without interest, till the treaty of 14,000,000 besides a certain propor-

peace was signed, and in 1816 the in- tion of the issues of such private banks

terest on this loan was fixed at three as abandon the use of their own paper

per cent. At present, 1880, 3,671,700 it can circulate notes.

CHAP. IT. THE WEALTH OF NATIONS. 321

pays the greater part of the annuities which are due to the creditors
of the public, it circulates Exchequer bills, and it advances to
Government the annual amount of the land and malt taxes, which
are frequently not paid up till some years thereafter. In those
different occupations, its duty to the public may sometimes have
obliged it, without any fault of its directors, to overstock the
circulation with paper money. It likewise discounts merchants 9
bills, and has, upon several occasions, supported the credit of the
principal houses, not only of England, but of Hamburg and Hol-
land. Upon one occasion, in 1763, it is said to have advanced
for this purpose, in one week, about ^1,600,000; a great part
of it in bullion. I do not, however, pretend to warrant either
the greatness of the sum, or the shortness of the time. Upon other
occasions this great company has been reduced to the necessity of
paying in sixpences.

It is not by augmenting the capital of the country, but by
rendering a greater part of that capital active and productive
than would otherwise be so, that the most judicious operations of
banking can increase the industry of the country. That part of
his capital which a dealer is obliged to keep by him unemployed,
and in ready money for answering occasional demands, is so much
dead stock, which, so long as it remains in this situation, produces
nothing either to him or to his country. The judicious operations
of banking enable him to convert this dead stock into active and
productive stock ; into materials to work upon, into tools to work
with, and into provisions and subsistence to work for ; into stock
which produces something both to himself and to his country.
The gold and silver money which circulates in any country, and
by means of which the produce of its land and labour is annually
circulated and distributed to the proper consumers, is, in the same
manner as the ready money of the dealer, all dead stock. It is
a very valuable part of the capital of the country, which produces
nothing to the country. 1 The judicious operations of banking,
by substituting paper in the room of a great part of this gold

1 It produces, at least, facility in ef- does not turn dead into active stock. It

fecting exchanges. To say that it pro- is certain that the machinery of a bank

duces nothing is the same as saying that brings together borrowers and lenders,

a good road produces nothing when it and thus gives activity and usefulness to

renders a market available for produce. accumulations which, without the bank,

Nor is it more correct to say, with Mac- would be mere hoards, but with it, be-,

culloch, that the operation of banking come capital.

YOL. I. Y

322 THE NATURE AND CAUSES OF BOOK n.

and silver, enables the country to convert a great part of this
dead stock into active and productive stock; into stock which
produces something to the country. The gold and silver money
which circulates in any country may very properly be compared
to a highway, which, while it circulates and carries to market all
the grass and corn of the country, produces itself not a single
pile of either. The judicious operations of banking, by providing,
if I may be allowed so violent a metaphor, a sort of waggon-
way through the air, enable the country to convert, as it were,
a great part of its highways into good pastures and corn-fields,
and ^hereby to increase very considerably the annual produce of
its laud and labour. The commerce and industry of the country,
however, it must be acknowledged, though they may be some-
what augmented, cannot be altogether so secure, when they are
thus, as it were, suspended upon the Dsodalian wings of paper
money, as when they travel about upon the solid ground of gold
and silver. Over and above the accidents to which they are
exposed from the unskilful ness of the conductors of this paper
money, they are liable to several others, from which no prudence
or skill of those conductors can guard them.

An unsuccessful war, for example, in which the enemy got
possession of the capital, and consequently of that treasure which
supported the credit of the paper money, would occasion a much
greater confusion in a country where the whole circulation was
carried on by paper, than in one where the greater part of it
was carried on by gold and silver. The usual instrument of com-
merce having lost its value, no exchanges could be made but either
by barter or upon credit. All taxes having been usually paid in
paper money, the prince would not have wherewithal either to
pay his troops or to furnish his magazines ; and the state of the
country would be much more irretrievable than if the greater part
of its circulation had consisted in gold and silver. A prince,
anxious to maintain his dominions at all times in the state in
which he can most easily defend them, ought, iipon this account,
to guard, not only against that excessive multiplication of paper
money which ruins the very banks which issue it, but even against
that multiplication of it, which enables them to fill the greater
part of the circulation of the country with it. 1

1 It is hardly necessary to say that acted on principles precisely the reverse
Governments, after Smith's time, have of those which this author recommended.

CHAP. ii. THE WEALTH OF NATIONS. 323

The circulation of every country may be considered as divided
into two different branches : the circulation of the dealers with
one another, and the circulation between the dealers and the
consumers. 1 Though the same pieces of money, whether paper
or metal, may be employed sometimes in the one circulation and
sometimes in the other, yet, as both are constantly going on at
the same time, each requires a certain stock of money of one kind
or another to carry it on. The value of the goods circulated
between the different dealers never can exceed the value of those
circulated between the dealers and the consumers; whatever is*
bought by the dealers, being ultimately destined to be sold to
the consumers. The circulation between the dealers, as it is carried
ou by wholesale, requires generally a pretty large sum for every
particular transaction. That between the dealers and the con-
sumers, on the contrary, as it is generally carried on by retail,
frequently requires but very small ones, a shilling, or even a half-
penny, being often sufficient. But small sums circulate much
faster than large ones. A shilling changes masters more fre-
quently than a guinea, and a halfpenny more frequently than a
shilling. Though the annual purchases of all the consumers,
therefore, are at least equal in value to those of all the dealers,
they can generally be transacted with a much smaller quantity
of money ; the same pieces, by a more rapid circulation, serving
as the instrument of many more purchases of the one kind than
of the other.

Paper money may be so regulated, as either to confine itself
very much to the circulation between the different dealers, or to
extend itself likewise to a great part of that between the dealers
and the consumers. Where no bank notes are circulated under ten
pounds value, as in London, paper money confines itself very

As a consequence, the progress of com- between dealers and dealers in the same

munities has been indefinitely crippled. country, but between dealers and dealers

It is a question of great interest, but in differont countries, as contrasted with

capable only of a general solution, as to the relations of the currency to retail

how far, despite the errors of our own trade. The storms which disturb the

policy in banking matters errors not money market arise from the first of these

serious or great by comparison this relations, those which are exhibited under

country has made its way in the industry the operation of the foreign exchanges

and commerce of the world by the mis- are relative to the second. But the last-

management of other Governments. named set of relations, though there is

1 This distinction alluded to by Adam no doubt that they are aifected indirectly,

Smith is of the greatest significance, em- perhaps abnormally, by the others, are

bracing as it does the relations, not only relevant to totally different causes.

Y 2,

324 THE NATURE AND CAUSES OF BOOK n.

much to the circulation between the dealers. When a ten pound
bank note comes into the hands of a consumer, he is generally
obliged to change it at the first shop where he has occasion to
purchase five shillings worth of goods, so that it often returns
into the hands of a dealer before the consumer has spent the
fortieth part of the money. Where bank notes are issued for so
small sums as twenty shillings, as in Scotland, paper money
extends itself to a considerable part of the circulation between
dealers and consumers. Before the Act of Parliament, which put
a stop^to the circulation of ten and five shilling notes, it filled
a still greater part of that circulation. In the currencies of North
America, paper was commonly issued for so small a sum as a
shilling, and filled almost the whole of that circulation. In some
paper currencies of Yorkshire it was issued even for so small a sum
as a sixpence.

Where the issuing of bank notes for such very small sums is
allowed and commonly practised, many mean people are both
enabled and encouraged to become bankers. A person whose pro-
missory note for five pounds, or even for twenty shillings, would
be rejected by everybody, will got it to be received without scruple
when it is issued for so small a sum as sixpence. But the frequent
bankruptcies to which such beggarly bankers must be liable, may
occasion a very considerable inconveniency, and sometimes even a
very great calamity to many poor people who had received their
notes in payment.

It were better, perhaps, that no bank notes were issued in any
part of the kingdom for a smaller sum than five pounds. Paper
money would then, probably, confine itself, in every part of the
kingdom, to the circulation between the different dealers, as much
as it does at present in London, where no bank notes are issued
under ten pounds value; 1 five pounds being, in most parts of the
kingdom, a sum which, though it will purchase, perhaps, little
more than half the quantity of goods, is as much considered, and
is as seldom spent all at once, as ten pounds are amidst the profuse
expense of London.

1 The Bank first issued ten pound notes one pound notes were temporarily issued,

in 1759, five pound notes in 1793, one But in 1844 all notes below five pounds

and two pound notes in 1797. The notes were prohibited. In Scotland and Ireland

below five pounds were generally with- one pound notes are issued, and the

drawn from circulation soon after the currency is popular,
resumption of cash payments. In 1826

CHAP. ii. TUE WEALTH OF NATIONS. 325

Where paper money, it is to be observed, is pretty much con-
fined to the circulation between dealers and dealers, as at London,
there is always plenty of gold and silver. Where it extends itself
to a considerable part of the circulation between dealers and con-
sumers, as in Scotland, and still more in North America, it banishes
gold and silver almost entirely from the country; almost all the
ordinary transactions of its interior commerce being thus carried
on by paper. The suppression of ten and five shilling bank notes
somewhat relieved the scarcity of gold and silver in Scotland ;
and the suppression of twenty shilling notes would probably re-
lieve it still more. Those metals are said to have become more
abundant in America since the suppression of some of their paper"
currencies. They are said, likewise, to have been more abundant
before the institution of those currencies.

Though paper money should be pretty much confined to the
circulation between dealers and dealers, yet banks and bankers
might still be able to give nearly the same assistance to the in-
dustry and commerce of the country as they had done when paper
money filled almost all the whole circulation. The ready money
which a dealer is obliged to keep by him for answering occasional
demands, is destined altogether for the circulation between himself
and other dealers of whom he buys goods. He has no occasion
to keep any by him for the circulation between himself and the
consumers, who are his customers, and who bring ready money
to him instead of taking any from him. Though no paper money,
therefore, was allowed to be issued, but for such sums as would
confine it pretty much to the circulation between dealers and
dealers ; yet, partly by discounting real bills of exchange, and
partly by lending upon cash accounts, banks and bankers might
still be able to relieve the greater part of those dealers from the
necessity of keeping any considerable part of their stock by them,
unemployed and in ready money, for answering occasional demands.
They might still be able to give the utmost assistance which
banks and bankers can, with propriety, give to traders of every
kind.

To restrain private people, it may be said, from receiving in
payment the promissory notes of a banker, for any sum whether
great or small, when they themselves are willing to receive them;
or, to restrain a banker from issuing such notes, when all his neigh-

326 THE NATURE AND CAUSES OF BOOK n.

hours are willing to accept of them, is a manifest violation of that
natural liberty which it is the proper business of law, not to infringe,
but to support. Such regulations may, no doubt, be considered as
in some respect a violation of natural liberty. But those exertions
of the natural liberty of a few individuals, which might endanger
the security of the whole society, are and ought to be restrained
by the laws of all governments ; of the most free, as well as of the
most despotical. The obligation of building party walls, in order
to prevent the communication of fire, is a violation of natural
liberty exactly of the same kind with the regulations of the
banking trade which are here proposed. 1

A paper money consisting in bank- notes, issued by people of
undoubted credit, payable upon demand without any condition, and
in fact always readily paid as soon as presented, is in every respect
equal in value to gold and silver money, since gold and silver
money can at any time be had for it. Whatever is either bought
or sold for such paper must necessarily be bought or sold as cheap
as it could have been for gold and silver.

The increase of paper money, it has been said, by augmenting
the quantity, and consequently diminishing the value of the whole
currency, necessarily augments the money price of commodities.
But as the quantity of gold and silver, which is taken from the
currency, is always equal to the quantity of paper which is added
to it, paper money does not necessarily increase the quantity of the
whole currency. From the beginning of the last century to the
present time, provisions never were cheaper in Scotland than in
*759> though, from the circulation of ten and five shilling bank
notes, there was then more paper money in the country than at
present. The proportion between the price of provisions in Scotland
and that in England, is the same now as before the great multi-
plication of banking companies in Scotland. Corn is, upon most
occasions, fully as cheap in England as in France, though there is
a great deal of paper money in England, and scarce any in France.
In 1751 and in 1752, when Mr. Hume 2 published his Political
Discourses, and soon after the great multiplication of paper money
in Scotland, there was a very sensible rise in the price of provisions,

1 Free trade in banking, it has been 2 The reference is probably to Hume's
wisely and wittily said, is free trade in Third Political Discourse, that on
swindling. Money.

CHAP. ir. THE WEALTH OF NATIONS. 327

owing probably to the badness of the seasons, and not to the
multiplication of paper money.

It would be otherwise, indeed, with a paper money consisting in
promissory notes, of which the immediate payment depended, in
any respect, either upon the good-will of those who issued them,
or upon a condition which the holder of the notes might not always
have it in his power to fulfil, or of which the payment was not
exigible till after a certain number of years, and which in the mean
time bore no interest. Such a paper money would, no doubt, fall
more or less below the value of gold and silver, according as the
difficulty or uncertainty of obtaining immediate payment was
supposed to be greater or less, or according to the greater or less
distance of time at which payment was exigible.

Some years ago the different banking companies of Scotland were
in the practice of inserting into their bank notes what they called an
Optional Clause, by which they promised payment to the bearer,
either as soon as the note should be presented, or, in the option
of the directors, six months after such presentment, together with
the legal interest for the said six months. The directors of some
of those banks sometimes took advantage of this optional clause,
and sometimes threatened those who demanded gold and silver in
exchange for a considerable number of their notes, that they would
take advantage of it, unless such demanders would content them-
selves with a part of what they demanded. 1 The promissory notes
of those banking companies constituted at that time the far greater
part of the currency of Scotland, which this uncertainty of payment
necessarily degraded below the value of gold and silver money.
During the continuance of this abuse (which prevailed chiefly in
1762, 1763, and 1764), while the exchange between London and
Carlisle was at par, that between London and Dumfries would
sometimes be four per cent, against Dumfries, though this town
is not thirty miles distant from Carlisle. But at Carlisle, bills
were paid in gold and silver ; whereas at Dumfries they were paid
in Scotch bank notes, and the uncertainty of getting those bank
notes exchanged for gold and silver coin had thus degraded them
four per cent, below the value of that coin. The same Act of

1 The same kind of banking, carried purposes, general in the manufacturing
on not by notes, but by bills of exchange, distiicts forty years ago, between dealers
is said to have been, to all intents and and dealers.

328 THE NATURE AND CAUSES OF BOOK n.

Parliament which suppressed ten and five shilling bank notes,
suppressed likewise this optional clause, and thereby restored the
exchange between England and Scotland to its natural rate, or
to what the course of trade and remittances might happen to
make it.

In the paper currencies of Yorkshire, the payment of so small
a sum as a sixpence sometimes depended upon the condition that
the holder of the note should bring the change of a guinea to the
person who issued it a condition which the holders of such notes
might frequently find it very difficult to fulfil, and which must
have degraded this currency below the value of gold and silver
money. An Act of Parliament accordingly declared all such clauses
unlawful, and suppressed, in the same manner as in Scotland, all
promissory notes payable to the bearer under twenty shillings
value.

The paper currencies of North America consisted, not in bank
notes payable to the bearer on demand, but in a Government paper,
of which the payment was not exigible till several years after it
was issued ; and though the colony Governments paid no interest
to the holders of this paper, they declared it to be, and in fact
rendered it, a legal tender of payment for the full value for which
it was issued. But allowing the colony security to be perfectly
good, a hundred pounds payable fifteen years hence, for example,
in a country where interest is at six per cent., is worth little more
than forty pounds ready money. To oblige a creditor, therefore,
to accept of this as full payment for a debt of a hundred pounds
actually paid down in ready money, was an act of such violent
injustice as has scarce, perhaps, been attempted by the Govern-
ment of any other country which pretended to be free. It bears
the evident marks of having originally been, what the honest
and downright Doctor Douglas 1 assures us it was, a scheme of
fraudulent debtors to cheat their creditors. The Government of
Pennsylvania, indeed, pretended, upon their first emission of paper
money in 1722, to render their paper of equal value with gold
and silver, by enacting penalties against all those who made any
difference in the price of their goods when they sold them for a

1 A Summary, Historical and Political, William Douglas, M.D., 1760. Douglas

of the First Planting, Progressive Im- inveighs on every possible occasion against

provements, and the Present State of the the paper currencies of the States.
British Settlements in North America.

CHAP. ii. THE WEALTH OF NATIONS. 329

colony paper, and when they sold them for gold and silver; a regu-
lation equally tyrannical, but much less effectual than that which
it was meant to support. A positive law may render a shilling
a legal tender for a guinea, because it may direct the courts of
justice to discharge the debtor who has made that tender. But
no positive law can oblige a person who sells goods, and who is
at liberty to sell or not to sell, as he pleases, to accept of a shilling
as equivalent to a guinea in the price of them. Notwithstanding
any regulation of this kind, it appeared by the course of exchange
with Great Britain, that a hundred pounds sterling was occasionally
considered as equivalent, in some of the colonies, to a hundred
and thirty pounds, and in others to so great a sum as eleven
hundred pounds currency; this difference in the value arising
from the difference in the quantity of paper emitted in the different
colonies, and in the distance and probability of the term of its final
discharge and redemption.

No law, therefore, could be more equitable than the Act of Parlia-
ment so unjustly complained of in the colonies, which declared that
no paper currency to be emitted there in time coming should be
a legal tender of payment.

Pennsylvania was always more moderate in its emissions of
paper money than any other of our colonies. Its paper currency
accordingly is said never to have sunk below the value of the
gold and silver which was current in the colony before the first
emission of its paper money. Before that emission, the colony had
raised the denomination of its coin, and had, by Act of Assembly,
ordered five shillings sterling to pass in the colonies for six and
threepence, and afterwards for six and eightpence. A pound
colony currency, therefore, even when that currency was gold and
silver, was more than thirty per cent, below the value of a pound
sterling, and when that currency was turned into paper, it was
seldom much more than thirty per cent, below that value. The
pretence for raising the denomination of the coin was to prevent
the exportation of gold and silver, by making equal quantities
of those metals pass for greater sums in the colony than they did
in the mother country. It was found, however, that the price
of all goods from the mother country rose exactly in proportion
as they raised the denomination of their coin, so that their gold
and silver were exported as fast as ever.

330 THE NATURE AND CAUSES OF BOOK n.

The paper of each colony being received in the payment of the
provincial taxes, for the full value for which it had been issued,
it necessarily derived from this use some additional value, over
and above what it would have had, from the real or supposed
distance of the term of its final discharge and redemption. This
additional value was greater or less, according as the quantity of
paper issued was more or less above what could be employed in
the payment of the taxes of the particular colony which issued it.
It was in all the colonies very much above what could be employed
in this manner. *

A prince, who should enact that a certain proportion of his
taxes should be paid in a paper money of a certain kind, might
thereby give a certain value to this paper money, even though
the term of its final discharge and redemption should depend
altogether upon the will of the prince. 1 If the bank which issued
this paper was careful to keep the quantity of it always somewhat
below what could easily be employed in this manner, the demand
for it might be such as to make it even bear a premium, or sell
for somewhat more in the market than the quantity of gold or
silver currency for which it was issued. Some people account in
this manner for what is called the Agio of the bank of Amsterdam,
or for the superiority of bank money over current money ; though
this bank money, as they pretend, cannot be taken out of the
bank at the will of the owner. The greater part of foreign bills
of exchange must be paid in bank money, that is, by a transfer
in the book of the bank; and the directors of the bank, they allege,
are careful to keep the whole quantity of bank money always below
what this use occasions a demand for. It is upon this account,
they say, that bank money sells for a premium, or bears an a^io
of four or five per cent, above the same nominal sum of the gold
and silver currency of the country. This account of the bank of
Amsterdam, however, it will appear hereafter, is in a great measure
chimerical.

1 The fact that a law or ordinance of difference between the depreciated paper

any country determines that taxes should and that which it represents. A Govern-

be payable in a depreciated currency is ment, in so far as it spends, (and it raises

a mere imposture. The exigencies of a a revenue to spend it,) is in no better

Government must be met, and, as a condition, when it makes its purchases

consequence, the charges levied must be than an individual or a trader is and is

increased at least so much as to cover the generally worse placed

CHAP. ii. THE WEALTH OF NATIONS. 331

A paper currency which falls below the value of gold and silver
coin docs not thereby sink the value of those metals, or occasion
equal quantities of them to exchange for a smaller quantity of
goods of any other kind. The proportion between the value of
gold and silver and that of goods of any other kind, depends in
all cases, not upon the nature or quantity of any particular paper
money, which may be current in any particular country, but
upon the richness or poverty of the mines, which happen at any
particular time to supply the great markets of the commercial
world with those metals. It depends upon the proportion between
the quantity of labour which is necessary in order to bring a
certain quantity of gold and silver to market, and that which is
necessary in order to bring thither a certain quantity of any other
sort of goods.

If bankers are restrained from issuing any circulating bank
notes, or notes payable to the bearer, for less than a certain sum,
and if they are subjected to the obligation of an immediate and
unconditional payment of such bank notes as soon as presented,
their trade may, with safety to the public, be rendered in all other
respects perfectly free. The late multiplication of banking com-
panies in both parts of the United Kingdom, an event by which
many people have been much alarmed, instead of diminishing,
increases the security of the public. It obliges all of them to be
more circumspect in their conduct, and, by not extending their
currency beyond its due proportion to their cash, to guard them-
selves against those malicious runs, which the rivalship of so many
competitors is always ready to bring upon them. It restrains the
circulation of each particular company within a narrower circle,
and reduces their circulating notes to a smaller number. By
dividing the whole circulation into a greater number of parts, the
failure of any one company, an accident which, in the course of
things, must sometimes happen, becomes of less consequence to
the public. This free competition too ooliges all bankers to be
more liberal in their dealings with their customers, lest their rivals
should carry them away. In general, if any branch of trade, or
any division of labour, be advantageous to the public, the freer
and more general the competition, it will always be the more so.

332 THE NATURE AND CAUSES OF BOOK n.

CHAPTER III.

OF THE ACCUMULATION OF CAPITAL, OR OF PRODUCTIVE AND
UNPRODUCTIVE LABOUR.

FT^HERE is one sort of labour which adds to the value of the
JL subject upon which it is bestowed : there is another which has
no such effect. The former, as it produces a value, may be called
productive ; the latter, unproductive * labour. Thus the labour of a
manufacturer adds, generally, to the value of the materials which he
works upon, that of his own maintenance, and of his master's profit.
The labour of a menial servant, on the contrary, adds to the value
of nothing. 1 Though the manufacturer has his wages advanced
to him by his master, he, in reality, costs him no expense, the whole
value of those wages being generally restored, together with a
profit, in the improved value of the subject upon which his labour
is bestowed. But the maintenance of a menial servant never is
restored. A man grows rich by employing a multitude of manu-
factures: he grows poor, by maintaining a multitude of menial
servants. The labour of the latter, however, has its value, and
deserves its reward as well as that of the former. But the labour
of the manufacturer fixes and realises itself in some particular sub-
ject or vendible commodity, which lasts for some time at least after
that labour is past. It is, as it were, a certain quantity of labour
stocked and stored up to be employed, if necessary, upon some other
occasion. That subject, or, what is the same thing, the price of that
subject, can afterwards, if necessary, put into motion a quantity of
labour equal to that which had originally produced it. The labour
of the menial servant, on the contrary, does not fix or realise itself
in any particular subject or vendible commodity. His services
generally perish in the very instant of their performance, and seldom

* Some French authors of great learn- tendance, economise the time, and there-
ing and ingenuity have used those words fore increase the productiveness, of the
in a different sense. In the last chapter person who employs him. Adam Smith
of the Fourth Book, I shall endeavour to must have meant a person whose labour
show that their sense is an improper is merely devoted to the unproductive
one. enjoyments of another man. Even in this

1 The absolute accuracy of this state- case, however, if the labour is embodied

ment depends on the service which such in material objects, it is, in an economical

a person performs. He may, by his at- sense, productive.

CHAP. in. THE WEALTH OF NATIONS. 333

leave any trace or value behind them, for which an equal quantity
of service could afterwards be procured.

The labour of some of the most respectable orders in society is,
like that of menial servants, unproductive of any value, and does
not fix or realise itself in any permanent subject, or vendible com-
modity, which endures after that labour is past, and for which
an equal quantity of labour could afterwards be procured. The
sovereign, for example, with all the officers both of justice and war
who serve under him, the whole army and navy, are unproductive
labourers. They are the servants of the public, and are maintained
by a part of the annual produce of the industry of other people.
Their service, how honourable, how useful, or how necessary soever,
produces nothing for which an equal quantity of service can after-
wards be procured. The protection, security, and defence of the
commonwealth, the effect of their labour this year, will not purchase
its protection, security, and defence for the year to come. In the
same class must be ranked, some both of the gravest and most im-
portant, and some of the most frivolous professions : churchmen,
lawyers, physicians, men of letters of all kinds ; players, buffoons,
musicians, opera-singers, opera-dancers, &C. 1 The labour of the
meanest of these has a certain value, regulated by the very same
principles which regulate that of every other sort of labour ; and
that of the noblest and most useful, produces nothing which could
afterwards purchase or procure an equal quantity of labour. Like
the declamation of the actor, the harangue of the orator, or the
tune of the musician, the work of all of them perishes in the very
instant of its production.

Both productive and unproductive labourers, and those who do
not labour at all, are all equally maintained by the annual produce
of the land and labour of the country. This produce, how great so-
ever, can never be infinite, but must have certain limits. According,

1 This assertion of Smith is even more deny the name of wealth to anything but

open to challenge than that which calls visible objects. And if- it be said that

menial service unproductive. The ser- they are necessary only by reason of the

vices rendered by civil administrators, by vices and infirmities of mankind, this is

the military, the navy, also by the police, no better objection than to charge the

and those who educate the minds and resistance of the air and the qualities of

preserve the physical powers of man, are matter with the difficulties attending

part of the process by which wealth can sustained motion, and the muscular

be accumulated and saved. To say that action needed towards appropriating and

they are not productive because they are shaping matter for human use.
not represented in material forms, is to

334 THE NATURE AND CAUSES OF BOOK n.

therefore, as a smaller or greater proportion of it is in any one
year employed in maintaining unproductive hands, the more in the
one case and the less in the other will remain for the productive,
and the next year's produce will be greater or smaller accordingly ;
the whole annual produce, if we except the spontaneous productions
of the earth, being the effect of productive labour. 1

Though the whole annual produce of the land and labour of every
country is, no doubt, ultimately destined for supplying the con-
sumption of its inhabitants, and for procuring a revenue to them ;
yet when it first comes either from the ground, or from the hands
of tfie productive labourers, it naturally divides itself into two parts.
One of them, and frequently the largest, is, in the first place, des-
tined for replacing a capital, or for renewing the provisions, mate-
rials, and finished work, which had been withdrawn from a capital ;
the other for constituting a revenue either to the owner of this
capital, as the profit of his stock, or to some other person, as the
rent of his land. Thus, of the produce of land, one part replaces the
capital of the farmer; the other pays his profit and the rent of the
landlord ; and thus constitutes a revenue both to the owner of this
capital, as the profits of his stock; and to some other person, as
the rent of his land. Of the produce of a great manufactory, in the
same manner, one part, and that always the largest, replaces the
capital of the undertaker of the work ; the other pays his profit,
and thus constitutes a revenue to the owner of this capital.

That part of the annual produce of the land and labour of any
country which replaces a capital, never is immediately employed to
maintain any but productive hands. It pays the wages of pro-
ductive labour only. That which is immediately destined for con-
stituting a revenue either as profit or as rent, may maintain in-
differently either productive or unproductive hands.

Whatever part of his stock a man employs as a capital, he always
expects it to be replaced to him with a profit. He employs it,

1 The proportion subsisting between that the larger the number of persons in
those who are engaged in supplying the a community who simply devote them-
material wants of society and those who selves to enjoyment, or expend their
are, in Smith's language, unproductive, is labour in supplying the wants of unpro-
the basis of that inquiry into the distri- ductive consumers, or the more wealth
bution of wealth which economists, sub- is accumulated in few hands, the lower
sequent to the author of the Wealth of is the material condition of those who
Nations, have taken considerable pains labour for the supply of that which con-
to complete. It is sufficient to say here, stitutes the subsistence of all.

CHAP. in. THE WEALTH OF NATIONS. 335

therefore, in maintaining productive hands only ; and after having
served in the function of capital to him, it constitutes a revenue to
them. Whenever he employs any part of it in maintaining unpro-
ductive hands of any kind, that part is, from that moment, with-
drawn from his capital, and placed in his stock reserved for imme-
diate consumption.

Unproductive labourers, and those who do not labour at all, are
all maintained by revenue; either, first, by that part of the annual
produce which is originally destined for constituting a revenue to
some particular persons, either as the rent of land or as the profits
of stock ; or, secondly, by that part which, though originally des-
tined for replacing a capital and for maintaining productive labour-
ers only, yet when it comes into their hands, whatever part of it is
over and above their necessary subsistence, may be employed in
maintaining indifferently either productive or unproductive hands.
Thus, not only the great landlord or the rich merchant, but even
the common workman, if his wages are considerable, may maintain
a menial servant ; or he may sometimes go to a play or a puppet-
show, and so contribute his share towards man tain ing one set of
unproductive labourers ; or he may pay some taxes, and thus help to
maintain another set, more honourable and useful, indeed, but equally
unproductive. No part of the annual produce, however, which had
been originally destined to replace a capital, is ever directed towards
maintaining unproductive hands, till after it has put into motion
its full complement of productive labour, or all that it could put
into motion in the way in which it was employed. The workman
must have earned his wages by work done, before he can employ
any part of them in this manner. That part too is generally but
a small one. It is his spare revenue only, of which productive
labourers have seldom a great deal. They generally have some,
however ; and in the payment of taxes the greatness of their
number may compensate, in some measure, the smallness of their
contribution. 1 The rent of land and the profits of stock are every-
where, therefore, the principal sources from which unproductive
hands derive their subsistence. These are the two sorts of revenue
of which the owners have generally most to spare. They might

1 The passage is suggestive. It follows, and above the absolute necessities of the

from what is said in the text, that it is people who are called on to contribute,

impossible for taxes to be paid, except No tax can be levied from those who are

from that part of revenue which is over on the margin of bare subsistence.

336 TIIE NATURE AND CAUSES OF BOOK n.

both maintain indifferently either productive or unproductive hands.
They seem, however, to have some predilection for the latter. The
expense of a great lord feeds generally more idle than industrious
people. The rich merchant, though with his capital he maintains
industrious people only, yet by his expense, that is, by the employ-
ment of his revenue, he feeds commonly the very same sort as the
great lord.

The proportion, therefore, between the productive and unproductive
hands, depends very much in every country upon the proportion
between that part of the annual produce which, as soon as it comes
either from the ground or from the hands of the productive labourers,
is destined for replacing a capital, and that which is destined for
constituting a revenue, either as rent, or as profit. This proportion
is very different in rich from what it is in poor countries.

Thus, at present, in the opulent countries of Europe, a very large,
frequently the largest portion of the produce of the land, is destined
for replacing the capital of the rich and independent farmer ; the
other for paying his profits, and the rent of the landlord. But
anciently, during the prevalency of the feudal government, a
very small portion of the produce was sufficient to replace the
capital employed in cultivation. 1 It consisted commonly in a
few wretched cattle, maintained altogether by the spontaneous
produce of uncultivated land, and which might, therefore, be
considered as part of that spontaneous produce. It generally
too belonged to the landlord, and was by him advanced to the
occupiers of the land. All the rest of the produce properly be-
longed to him too, either as rent for his land, or as profit upon this
paltry capital. The occupiers of land were generally bondmen,
whose persons and effects were equally his property. Those who
were not bondmen were tenants at will, and though the rent which
they paid was often nominally little more than a quit-rent, it really
amounted to the whole produce of the land. 2 Their lord could at
all times command their labour in peace, and their service in war.

1 The statement is historically an the value of the land. This, indeed, might

error. In the feudal times to which have been . anticipated from the greatly

Smith alludes, i. e. five centuries ago, the superior productiveness in modern as

proportion between capital employed in opposed to mediaeval agriculture,

cultivation, and the market value of the 2 This is of course impossible. The

land, was not less than three to one. In rent may have been as much as the land

the present day, the proportion is reversed, could bear, or the occupier be able to

the capital being not more than a third of pay, and so have become virtually a tax.

CHAP. in. THE WEALTH OF NATIONS. 337

Though they lived at a distance from his house, they were equally
dependent upon him as his retainers who lived in it. But the whole
produce of the land undoubtedly belongs to him, who can dispose of
the labour and service of all those whom it maintains. In the pre-
sent state of Europe, the share of the landlord seldom exceeds a
third, sometimes not a fourth part of the whole produce of the land.
The rent of land, however, in all the improved parts of the country,
has been tripled and quadrupled since those ancient times ; and this
third or fourth part of the annual produce is, it seems, three or four
times greater than the whole had been before. 1 In the progress of
improvement, rent, though it increases in proportion to the extent,
diminishes in proportion to the produce of the land.

In the opulent countries of Europe, great capitals are at present
employed in trade and manufactures. In the ancient state, the
little trade that was stirring, and the few homely and coarse manu-
factures that were carried on, required but very small capitals.
These, however, must have yielded very large profits. 2 The rate of
interest was nowhere less than ten per cent., and their profits must
have been sufficient to afford this great interest. At present, the
rate of interest, in the improved parts of Europe, is nowhere higher
than six per cent., and in some of the most improved it is so low as
four, three, and two per cent. Though that part of the revenue of
the inhabitants which is derived from the profits of stock is always
much greater in rich than in poor countries, it is because the stock
is much greater ; in proportion to the stock, the profits are generally
much less.

That part of the annual produce, therefore, which, as soon as it
comes either from the ground, or from the hands of the productive
labourers, is destined for replacing a capital, is not only much
greater in rich than in poor countries, but bears a much greater

1 The rise in rents is from fifty to shown that manufactures were carried on

sixty-fold, that of wheat and other kinda in ancient times with borrowed money,

of grain about nine- fold. The sentence, that the rate of interest in these times

therefore, with which the author con- was any indication of the rate of profit,

eludes the paragraph, is the reverse of The rate of interest is determined by

the facts. Land in this country produces, two causes the proportion between bor-

in all probability, seven times as much rowers and lenders, and the ascertained

food as it did 500 years ago, but the good faith of the former. This good

rise in rent is fully proportionate. See faith is interpreted under the usages

the Editor's History of Agriculture and of modern commercial society, but no

Prices, vol. i. ch. 28. guarantees of it were forthcoming in the

a It does not seem, unless it could be ages our author refers to

VOL. I. Z

338 THE NATURE AND CAUSES OF BOOK ir.

proportion to that which is immediately destined for constituting a
revenue either as rent or as profit. The funds destined for the
maintenance of productive labour, are not only much greater in the
former than in the latter, but bear a much greater proportion to
those which, though they may be employed to maintain either pro-
ductive or unproductive hands, have generally a predilection for the
latter.

The proportion between those different funds necessarily deter-
mines in every country the general character of the inhabitants as
to industry or idleness. We are more industrious than our fore-
fathers ; because in the present times the funds destined for the
maintenance of industry are much greater in proportion to those
which are likely to be employed in the maintenance of idleness, than
they were two or three centuries ago. Our ancestors were idle for
want of a sufficient encouragement to industry. It is better, says
the proverb, to play for nothing 1 , than to work for nothing. In
mercantile and manufacturing towns, where the inferior ranks of
people arc chiefly maintained by the employment of capital, they are
in general industrious, sober, and thriving ; as in many English
and in most Dutch towns. In thobC towns which are principally
supported by the constant or occasional residence of a court, and in
which the inferior ranks of people are chiefly maintained by the
spending of revenue, they are in general idle, dissolute, and poor ;
as at Rome, Versailles, Compi&gne, and Fontainebleau. If you
except Rouen and Bordeaux, there is little trade or industry in any
of the Parliament towns of France ; and the inferior ranks of people,
being chiefly maintained by the expense of the members of the
courts of justice, and of those who come to plead before them, are in
general idle and poor. The great trade of Rouen and Bordeaux
seems to be altogether the effect of their situation. Rouen is
necessarily the entrepot of almost all the goods which are brought
either from foreign countries, or from the maritime provinces of
France, for the consumption of the great city of Paris. Bordeaux
is in the same manner the entrepot of the wines which grow upon
the banks of the Garonne and of the rivers which run into it, one
of the richest wine countries in the world, and which seems to pro-
duce the wine fittest for exportation, or best suited to the taste of
foreign nations. Such advantageous situations necessarily attract
a great capital by the great employment which they afford it ;

CHAP. in. THE WEALTH OF NATIONS. 339

and the employment of this capital is the cause of the industry of
those two cities. In the other Parliament towns of France, very
little more capital seems to be employed than what is necessary for
supplying their own consumption ; that is, little more than the
smallest capital which can be employed in them. The same thing
may be said of Paris, Madrid, and Vienna. Of those three cities,
Paris is by far the most industrious ; but Paris itself is the principal
market of all the manufactures established at Paris, and its own
consumption is the principal object of all the trade which it carries
on, London, Lisbon, and Copenhagen are, perhaps, the only three
cities in Europe which are both the constant residence of a court,
and can at the same time be considered as trading cities, or as
cities which trade not only for their own consumption, but for that
of other cities and countries. The situation of all the three is
extremely advantageous, and naturally fits them to be the entrepots
of a great part of the goods destined for the consumption of distant
places. In a city where a great revenue is spent, to employ with
advantage a capital for any other purpose than for supplying the
consumption of that city, is probably more difficult than in one in
which the inferior ranks of people have no other maintenance but
what they derive from the employment of such a capital. The idle-
ness of the greater part of the people who are maintained by the
expense of revenue, corrupts, it is probable, the industry of those
who ought to be maintained by the employment of capital, and
renders it less advantageous to employ a capital there than in other
places. There was little trade or industry in Edinburgh before the
Union. When the Scotch Parliament was no longer to be assembled
in it, when it ceased to be the necessary residence of the principal
nobility and gentry of Scotland, it became a city of some trade and
industry. It still continues, however, to be the residence of the
principal courts of justice in Scotland, of the boards of customs
and excise, &c. A considerable revenue, therefore, still continues
to be spent in it. In trade and industry it is much inferior to
Glasgow, of which the inhabitants are chiefly maintained by the
employment of capital. 1 The inhabitants of a large village, it
has sometimes been observed, after having made considerable
progress in manufactures, have become idle and poor, in conse-*

1 Glasgow is now (1880) the second city for population and opulence in the
United Kingdom.

Z 2

340 THE NATURE AND CAUSES OF BOOK n.

quence of a great lord having taken up his residence in their
neighbourhood.

The proportion between capital and revenue, therefore, seems
everywhere to regulate the proportion between industry and idle-
ness. Wherever capital predominates, industry prevails ; wherever
revenue, idleness. Every increase or diminution of capital, there-
fore, naturally tends to increase or diminish the real quantity
of industry, the number of productive hands, and consequently
the exchangeable value of the annual produce of the land and
labour of the country,, the real wealth and revenue of all its in-
habilants.

Capitals are increased by parsimony, and diminished by prodi-
gality and misconduct.

Whatever a person saves from his revenue he adds to his capital,
and either employs it himself in maintaining an additional number
of productive hands, or enables some other person to do so, by lend-
ing it to him for an interest, that is, for a share of the profits. As
the capital of an individual can be increased only by what he saves
from his annual revenue or his annual gains, so the capital of a
society, which is the same with that of all the individuals who com-
pose it, can be increased only in the same manner. 1

Parsimony, and not industry, is the immediate cause of the in-,
crease of capital. Industry, indeed, provides the subject which
parsimony accumulates. But whatever industry might acquire, if
parsimony did not save and store up, the capital would never be the
greater.

Parsimony, by increasing the fund which is destined for the main-
tenance of productive hands, tends to increase the number of those
hands whose labour adds to the value of the subject upon which it
is bestowed. 2 It tend therefore to increase the exchangeable value
of the annual produce of the land and labour of the country. It

1 All capital, as Mr. Mill says, is the of industry and parsimony. Population
result of saving, and all that is saved is will increase up to the means of sub-
destined to employ labour with a view sistence, but whether population is re-
to profit. Some portion of public and dundant or no(j, will depend on the kind
private wealth is always employed as a of subsistence in which that population
reserve to meet contingencies, in just the acquiesces. If the standard be high,
same way as a portion of a banker's stock there is no other risk of overabundant
is so hoarded. population than that which arises from,

2 It will be seen that Adam Smith casualties; if it be low, no frugality in
recognised the dominant cause of an in* living will obviate the risk.

creased population iu the accumulations

CHAP. in. THE WEALTH OF NATIONS. 341

puts into motion an additional quantity of industry, which gives an
additional value to the annual produce.

What is annually saved is as regularly consumed as what is
annually spent, and nearly in the same time too ; but it is consumed
by a different set of people. That portion of his revenue which
a 'rich man annually spends, is in most cases consumed by idle
guests and menial servants, who leave nothing behind them in
return for their consumption. That portion which he annually
saves, as for the sake of the profit it is immediately employed as
a capital, is consumed in the same manner, and nearly in the same
time too, but by a different set of people by labourers, manufac-
turers, and artificers, who reproduce with a profit the value of their
annual consumption. His revenue, we shall suppose, is paid him in
money. Had he spent the whole, the food, clothing, and lodging
which the whole could have purchased would have been distributed
among the former set of people. By saving a part of it, as that part
is for the sake of the profit immediately employed as capital either
by himself or by some other person, the food, clothing, and lodging
which may be purchased with it are necessarily reserved for the Litter.
The consumption is the same, but the consumers are different.

By what a frugal man annually saves, he not only affords main-
tenance to an additional number of productive hands, for that or
the ensuing year, but, like the founder of a public workhouse, he
establishes as it" were a perpetual fund for the maintenance of an equal
number in all times to come. The perpetual allotment and destina-
tion of this fund, indeed, is not always guarded by any positive law,
by any trust-right or deed of mortmain. It is always guarded,
however, by a very powerful principle, the plain and evident in-
terest of every individual to whom any share of it shall ever belong.
No part of it can ever afterwards be employed to maintain any but
productive hands, without an evident loss to the person who thus
perverts it from its proper destination.

The prodigal perverts it in this manner. By not confining his
expense within his income, he encroaches upon his capital. Like
him who perverts the revenue of some pious foundation to profane
purposes, he pays the wages of idleness with those funds which the
frugality of his forefathers had, as it were, consecrated to the main-
tenance of industry. By diminishing the funds destined for the
employment of productive labour, he necessarily diminishes, so far

342 THE NATURE AND CAUSES OF BOOK n.

as it depends upon him, the quantity of that labour which adds
a value to the subject upon which it is bestowed, and, consequently,
the value of the annual produce of the land and labour of the whole
country, the real wealth and revenue of its inhabitants. If the
prodigality of some was not compensated by the frugality of others,
the conduct of every prodigal, by feeding the idle with the bread of
the industrious, tends not only to beggar himself, but to impoverish
his country.

Though the expense of the prodigal should be altogether in home-
made, and no part of it in foreign commodities, its effect upon the
productive funds of the society would still be the same. Every
year there would still be a certain quantity of food and clothing,
which ought to have maintained productive, employed in main-
taining unproductive hands. Every year, therefore, there would
still be some diminution in what would otherwise have been the
value of the annual produce of the land and labour of the country.

This expense, it may be said, indeed, not being in foreign goods,
and not occasioning any exportation of gold and silver, the same
quantity of money would remain in the country as before. But if
the quantity of food and clothing, which were thus consumed by
unproductive, had been distributed among productive hands, they
would have reproduced, together with a profit, the full value of their
consumption. The same quantity of money would in this case
equally have remained in the country, and there would besides have
been a reproduction of an equal value of consumable goods. There
would have been two values instead of one.

The same quantity of money, besides, cannot long remain in any
country, in which the value of the annual produce diminishes. The
sole use of money is to circulate consumable goods. By means of it,
provisions, materials, and finished work are bought and sold, and
distributed to their proper consumers. The quantity of money,
therefore, which can be annually employed in any country must be
determined by the value of the consumable goods annually circulated
within it. These must consist either in the immediate produce of
the land and labour of the country itself, or in something which had
been purchased with some part of that produce. Their value, there-
fore, must diminish as the value of that produce diminishes, and
along with it the quantity of money which can be employed in
circulating them. But the money which by this annual diminution

CHAP. HI. THE WEALTH OF NATIONS. 343

of produce is annually thrown out of domestic circulation will not be
allowed to lie idle. The interest of whoever possesses it, requires
that it should be employed. But having no employment at home,
it will, in spite of all laws and prohibitions, be sent abroad, and
employed in purchasing consumable goods which may be of some
use at home. Its annual exportation will in this manner continue
for some time to add something to the annual consumption of the
country beyond the value of its own annual produce. What in
the days of its prosperity had been saved from that annual produce,
and employed in purchasing gold and silver, will contribute for
some little time to support its consumption in adversity. The
exportation of gold and silver is, in this case, not the cause, but the
effect of its declension, and may even, for some little time, alleviate
the misery of that declension.

The quantity of money, on the contrary, must in every country
naturally increase as the value of the annual produce increases. The
value of the consumable goods annually circulated within the society
being greater, will require a greater quantity of money to circulate
them. A part of the increased produce, therefore, will naturally be
employed in purchasing, wherever it is to be had, the additional
quantity of gold and silver necessary for circulating the rest. The
increase of those metals will in this case be the effect, not the cause,
of the public prosperity. Gold and silver are purchased everywhere
in the same manner. The food, clothing, and lodging, the revenue
and maintenance of all those whose labour or stock is employed in
bringing them from the mine to the market, is the price paid for
them in Peru as well as in England. The country which has this
price to pay will never be long without the quantity of those metals
which it has occasion for ; and no country will ever long retain a
quantity which it has no occasion for.

Whatever, therefore, we may imagine the real wealth and revenue
of a country to consist in, whether in the value of the annual pro-
duce of its land and labour, as plain reason seems to dictate, or in
the quantity of the precious metals which circulate within it, as
vulgar prejudices suppose ; in either view of the matter, every pro-
digal appears to be a public enemy, and every frugal man a public-
benefactor. 1

1 Adam Smith has been combating a profuse expenditure is good for trade,
popular opinion, not yet extinct, that It is good for particular traders, who

344 THE NATURE AND CAUSES OF , BOOK n.

The effects of misconduct are often the same as those of pro-
digality. Every injudicious and unsuccessful project in agriculture,
mines, fisheries, trade, or manufactures, tends in the same manner
to diminish the funds destined for the maintenance of productive
labour. In every such project, though the capital is consumed by
productive hands only, yet, as by the injudicious manner in which
they are employed, they do not reproduce the full value of their
consumption, there must always be some diminution in what would
otherwise have been the productive funds of the society,

It can seldom happen, indeed, that the circumstances of a great
natfon can be much affected either by the prodigality or misconduct
of individuals ; the profusion or imprudence of some being always
more than compensated by the frugality and good conduct of
others. 1

With regard to profusion, the principle, which prompts to ex-
pense, is the passion for present enjoyment : which, though some-
times violent and very difficult to be restrained, is in general only
momentary and occasional. But the principle which prompts to
save, is the desire of bettering our condition, a desire which, though
generally calm and dispassionate, comes with us from the womb,
and never leaves us till we go into the grave. In the whole interval
which separates these two moments, there is scarce perhaps a single
instant in which any man is so perfectly and completely satisfied
with his situation, as to be without any wish of alteration or im-
provement of any kind. An augmentation of fortune is the means
by which the greater part of men propose and wish to better their
condition. It is the means the most vulgar and the most obvious ;
and the most likely way of augmenting their fortune is to save and
accumulate some part of what they acquire, either regularly and
annually, or upon some extraordinary occasions. Though the prin-
ciple of expense, therefore, prevails in almost all men upon some

reap a profit on the expenditure incurred. prodigality in another. See Bastiat, Ce

But it is detrimental to the public good, qu'on voit, et ce qu'on ne voit pas, vol. v.

the good of all classes of society, because p. 336.

it checks saving, and consumes public 1 It is said that such a decline, in con-
wealth. The question, however, as to sequence of great prodigality on the part
what constitutes an expenditure which of the wealthier classes, the mass of the
does not interfere with the course of people being unable by their parsimony
public prosperity and that which does, to compensate for this outlay on the part
cannot be determined authoritatively, of the rich, has been witnessed in Russia,
because the line which divides the one and is the cause why the balance of
from the other cannot be fixed. Moderate that country's trade has been constantly
expenditure in one age would be profuse met by the exportation of securities.

CHAP. m. THE WEALTH: OF NATIONS. 345

occasions, and in some men upon almost all occasions, yet in the
greater part of men, taking the whole course of their life at an
average, the principle of frugality seems not only to predominate,
but to predominate very greatly.

With regard to misconduct, the number of prudent and successful
undertakings is everywhere much greater than that of injudicious
and unsuccessful ones. After all our complaints of the frequency of
bankruptcies, the unhappy men who fall into this misfortune make
but a very small part of the whole number engaged in trade, and,
all other sorts of business ; not much more, perhaps, than one in a
thousand. Bankruptcy is perhaps the greatest and most humiliating
calamity which can befall an innocent man. The greater part of
men, therefore, are sufficiently careful to avoid it. Some, indeed,
do not avoid it, as some do not avoid the gallows. 1

Great nations are never impoverished by private, though they
sometimes are by public prodigality and misconduct. The whole,
or almost the whole public revenue, is in most countries employed
in maintaining unproductive hands. Such are the people who
compose a numerous and splendid court, a great ecclesiastical estab-
lishment, great fleets and armies, who in time of peace produce
nothing, and in time of war acquire nothing which can compensate
the expense of maintaining them, even while the war lasts. Such
people, as they themselves produce nothing, are all maintained by
the produce of other men's labour. When multiplied, therefore, to
an unnecessary number, they may in a particular year consume so
great a share of this produce as not to leave a sufficiency for main-
taining the productive labourers, who should reproduce it next year.
The next year's produce, therefore, will be less than that of the fore-
going, and if the same disorder should continue, that of the third
year will be still less than that of the second. Those unproductive
hands, who should be maintained by a part only of the spare revenue
of the people, may consume so great a share of their whole revenue,

1 The experience of modern trade in unfortunate debtors and to protect equally

the United Kingdom, though of course unfortunate creditors, bankruptcy is com-

most business is managed cautiously and mon, fraudulent compositions as common,

honestly, ^points to a considerable dete- and shamelessness commoner still. What,

rioration in the honourable feeling which however, can be expected from the trade

prevailed according to our author's testi- of a country when it is confessed that

mony at the time when this book was seventy-five per cent, of the assets of

published. Thanks to laws which have the estates in English bankruptcy are

been enacted, more it seems to gratify swallowed up in law charges ?
the rapacity of lawyers than to save

346 THE NATURE AND CAUSES OF BOOK n.

and thereby oblige so great a number to encroach upon their capi-
tals, upon the funds destined for the maintenance of productive
labour, that all the frugality and good conduct of individuals may
not be able to compensate the waste and degradation of produce
occasioned by this violent and forced encroachment.

This frugality and good conduct, however, is upon most occasions,
it appears from experience, sufficient to compensate, not only the
private prodigality and misconduct of individuals, but the public
extravagance of government. The uniform, constant, and uninter-
rupted effort of every man to better his condition, the principle from
which public and national, as well as private opulence is originally
derived, is frequently powerful enough to maintain the natural pro-
gress of things towards improvement, in spite both of the extrava-
gance of government, and of the greatest errors of administration.
Like the unknown principle of animal life, it frequently restores
health and vigour to the constitution, in spite, not only of the
disease, but of the absurd prescriptions of the doctor.

The annual produce of the land and labour of any nation can be
increased in its value by no other means, but by increasing either
the number of its productive labourers, or the productive powers of
those labourers who had before been employed. The number of its
productive labourers, it is evident, can never be much increased, but
in consequence of an increase of capital, or of the funds destined for
maintaining them. The productive powers of the same number of
labourers cannot" be increased, but in consequence either of some
addition and improvement to those machines and instruments which
facilitate and abridge labour, or of a more proper division and dis-
tribution of employment. In either case an additional capital is
almost always required. It is by means of an additional capital
only that the undertaker of any work can either provide his work-
men with better machinery, or make a more proper distribution of
employment among them. When the work to be done consists of
a number of parts, to keep every man constantly employed in one
way requires a much greater capital than where every man is occa-
sionally employed in every different part of the work. When we
compare, therefore, the state of a nation at two different periods,
and find that the annual produce of its land and labour is evidently
greater at the latter than at the former, that its lands are better
cultivated, its manufactures more numerous and more flourishing,

CHAP. in. THE WEALTH OF NATIONS. 347

and its trade more extensive, we may be assured that its capital
must have increased during the interval between those two periods,
and that more must have been added to it by the good conduct of
some, than had been taken from it either by the private misconduct
of others, or by the public extravagance of government. But we
shall find this to have been the case of almost all nations, in all
tolerably quiet and peaceable times, even of those who have not
enjoyed the most prudent and parsimonious governments. To form
a right judgment of it, indeed, we must compare the state of the
country at periods somewhat distant from one another. The pro-
gress is frequently so gradual, that, at near periods, the improve-
ment is not only not sensible, but from the declension either of
certain branches of industry or of certain districts of the country,
things which sometimes happen though the country in general be
in great prosperity, there frequently arises a suspicion that the
riches and industry of the whole are decaying.

The annual produce of the land and labour of England, for ex-
ample, is certainly much greater than it was, a little more than a
century ago, at the restoration of Charles II. Though at present,
few people, I believe, doubt of this, yet during this period five years
have seldom passed away in which some book or pamphlet has not
been published, written too with such abilities as to gain some
authority with the public, and pretending to demonstrate that the
wealth of the nation was fast declining, that the country was de-
populated, agriculture neglected, manufactures decaying, and trade
undone. Nor have these publications been all party pamphlets, the
wretched offspring of falsehood and venality. Many of them have
been written by very candid and very intelligent people, who wrote
nothing but what they believed, and for no other reason but because
they believed it.

The annual produce of the land and labour of England, again,
was certainly much greater at the Restoration than we can suppose
it to have been a hundred years before, at the accession of Eliza-
beth. At this period too, we have all reason to believe, the country
was much more advanced in improvement than it had been about
a century before, towards the close of the dissensions between the
houses of York and Lancaster. Even then it was, probably, in a
better condition than it had been at the Norman conquest, and at
the Norman conquest, than during the confusion of the Saxon

348 THE NATURE AND CAUSES OF BOOK n.

Heptarchy. Even at this early period, it was certainly a more
improved country than at the invasion of 'Julius Caesar, when its
inhabitants were nearly in the same state with the savages in North
America. 1

In each of those "periods, however, there was not only much
private and public profusion, many expensive and unnecessary wars,
great perversion of the annual produce from maintaining productive
to maintain unproductive hands ; but sometimes, in the confusion
of civil discord, such absolute waste and destruction of stock, as
might be supposed, not only to retard, as it certainly did, the
natural accumulation of riches, but to have left the country, at the
end of the period, poorer than at the beginning. Thus, in the
happiest and most fortunate period of them all, that which has
passed since the Restoration, how many disorders and misfortunes
have occurred, which, could they have been foreseen, not only the
impoverishment, but the total ruin of the country would have been
expected from them. 2 The fire and the plague of London, the two
Dutch wars, the disorders of the Revolution, the war in Ireland, the
four expensive French wars of 1668, 1702, 1742, and 1756, toge-
ther with the two rebellions of 1715 and 1745. In the course of
the four French wars, the nation has contracted more than a
hundred and forty-five millions of debt, over and above all the other
extraordinary annual expense which they occasioned, so that the
whole cannot be computed at less than two hundred millions. So
great a share of the annual produce of the land and labour of the
country has, since the Revolution, been employed upon different
occasions, in maintaining an extraordinary number of unproductive
hands. But had not those wars given this particular direction to
so large a capital, the greater part of it would naturally have been
employed in maintaining productive hands, whose labour would

1 On the progress of wealth in Eng- on a country's material prosperity, of
land see, for the early period referred to, civil war, and those of civil war, again,
the Editor's History of Agriculture and are far short of the evils of rapacious or
Prices; for the later, Macpherson's Annals bad government. The reason is, that the
of Commerce; and for the period between cost of the first named is defrayed out
the outbreak of the Continental war and of annual production, by taxation, or by
the present time, Porter's Progress of the hoards borrowed to meet expenditure;
Nation, Tooke and Newmarch's History that of the second is for the most part
of Prices, and the Annual Summaries sheer waste and destruction ; while that
published by the Economist, which are of the third is the subversion of the con-
currently ascribed to Mr. Newmarch. ditions on which the very existence of

3 The greatest expense of foreign war civil society is based,
falls far short, in its destructive influences

CHAP. in. - THE WEALTH OF NATIONS. 349

have replaced, with a profit, the whole value of their consumption.
The value of the annual produce of the land and labour of the
country would have been considerably increased by it every year,
and every year's increase woulcl have augmented still more that of
the following 1 year. More houses would have been built, more
lands would have been improved, and those which had been im^
proved before would have been better cultivated, more manu-
factures would have been established, and those which had been
established before would have been more extended ; and to what
height the real wealth and revenue of the country might, by
this time, have been raised, it is not perhaps very easy even to
imagine. 1

But though the profusion of government must, undoubtedly,
have retarded the natural progress of England towards wealth and
improvement, it has not been able to stop it. The annual produce
of its land and labour is, undoubtedly, much greater at present
than it was either at the Restoration or at the Revolution. The
capital, therefore, annually employed in cultivating this land, and
in maintaining' this labour, must likewise be much greater. In
the midst of all the exactions of government, this capital has been
silently and gradually accumulated by the private frugality and
good conduct of individuals, by their universal, continual, and
uninterrupted effort to better their own condition. It is this effort,
protected by law and allowed by liberty to exert itself in the
manner that* is most advantageous, which has maintained the
progress of England towards opulence and improvement in almost
all former times, and which, it is to be hoped, will do so in all
future times. England, however, as it has never been blessed with
a very parsimonious government, so parsimony has at no time been
the characteristical virtue of its inhabitants. It is the highest
impertinence and presumption, therefore, in kings and ministers,
to pretend to watch over the economy of private people, and to

x It does not follow that Government must fall with the greatest severity on
expenditure is sheer waste, though, up the poorest classes of the community,
to the time of Adam Smith, it was Mr. Porter has shown that the real
seldom anything better. But when a weight of taxation during the great Con-
nation is thrifty, and eager to accumulate tinental war was endured by the poorer
wealth, the expenditure of Government classes. But there is no doubt that the
may stimulate those inventions by which same period witnessed that development
labour is economised and wealth aug- of mechanical skill and commercial ac-
mented. This is no excuse for an excess tivity which has been the chief cause of
of expenditure, for the weight of this the industrial superiority of this country*

350 THE NATURE AND CAUSES OF BOOK n.

restrain their expense either by sumptuary laws, or by prohibiting
the importation of foreign luxuries. They are themselves always,
and without any exception, the greatest spendthrifts in the society.
Let them look well after their own* expense, and they may safely
trust private people with theirs. If their own extravagance does
not ruin the state, that of their subjects never will. 1

As frugality increases, and prodigality diminishes the public
capital, so the conduct of those, whose expense just equals their
revenue, without either accumulating or encroaching, neither
increases nor diminishes it. Some modes of expense, however,
seem to contribute more to the growth of public opulence than
others.

The revenue of an individual may be spent, either in things
which are consumed immediately, and in which one day's expense
can neither alleviate nor support that of another ; or it may be
spent in things more durable, which can therefore be accumulated,
and in which every day's expense may, as he chooses, either
alleviate or support and heighten the effect of that of the following
day. A man of fortune, for example, may either spend his revenue
in a profuse and sumptuous table, and in maintaining a great number
of menial servants, and a multitude of dogs and horses; or content-
ing himself with a frugal table and few attendants, he may lay out
the greater part of it in adorning his house or his country villa, in
useful or ornamental buildings, in useful or ornamental furniture,
in collecting books, statues, pictures ; or in things more frivolous,
jewels, baubles, ingenious trinkets of different kinds ; or, what is
most trifling of all, in amassing a great wardrobe of fine clothes,
like the favourite and minister of a great prince who died a few
years ago. Were two men of equal fortune to spend their revenue,
the one chiefly in the one way, the other in the other, the magni-
ficence of the person whose expense had been chiefly in durable
commodities, would be continually increasing, every day's expense

1 Sumptuary laws have been repealed at last that the intelligence of no Govern-
or allowed to fall into desuetude in our ment is competent to guide or control
time. But there WHS much to justify the private life of its subjects ; that such
Adam Smith's severe observations in the an interference is as futile as it is im-
social history of this country. The laws pertinent ; and that the inductions of the
to which the author refers are an off- many, framed as they are from that per-
shoot of that theory of paternal govern- sonal experience which proves that rights
ment which has lasted so long, and with and duties must be secured and limited
such disastrous effects, in the modern by mutual concessions, are incomparably
history of the world. We have learned wiser than the edicts of the few.

CHAP. IIT. THE WEALTH OF NATIONS. 351

contributing something to support and heighten the effect of that
of the following day ; that of the other, on the contrary, would be
no greater at the end of the period than at the beginning. The
former too would, at the end of the period, be the richer man of the
two. He would have a stock of goods of some kind or other,
which, though it might not be worth all that it cost, would always
be worth something. No trace or vestige of the expense of the
latter would remain, and the effects of ten or twenty years' pro-
fusion would be as completely annihilated as if they had never
existed.

As the one mode of expense is more favourable than the other to
the opulence of an individual, so is it likewise to that of a nation.
The houses, the furniture, the clothing of the rich, in a little time,
become useful to the inferior and middling ranks of people. They
are able to purchase them when their superiors grow weary of
them, and the general accommodation of the whole people is thus
gradually improved, when this mode of expense becomes universal
among men of fortune. In countries which have long been rich,
you will frequently find the inferior ranks of people in possession
both of houses and furniture perfectly good and entire, but of
which neither the one could have been built, nor the other have
been made for their use. What was formerly a seat of the family
of Seymour, is now an inn upon the Bath-road. The marriage-bed
of James the First of Great Britain, which his Queen brought with
her from Denmark, as a present fit for a sovereign to make to a
sovereign, was, a few years ago, the ornament of an alehouse at
Dunfermline. In some ancient cities, which either have been long
stationary, or have gone somewhat to decay, you will sometimes
scarce find a single house which could have been built for its present
inhabitants. If you go into those houses, too, you will frequently
find many excellent, though antiquated pieces of furniture, which
are still very fit for use, and which could as little have been made
for them. Noble palaces, magnificent /illas, great collections of
books, statues, pictures, and other curiosities, are frequently both
an ornament and an honour, not only to the neighbourhood, but
to the whole country to which they belong. Versailles, is an orna-
ment and an honour to France, Stowe and Wilton to England.
Italy still continues to command some sort of veneration by the
number of monuments of this kind which it possesses, though the

352 THE NATURE AND CAUSES OF BOOK n,

wealth which produced them has decayed, and though the genius
which planned them seems to be extinguished, perhaps from not
having the same employment.

The expense too, which is laid out in durable commodities, is
favourable, not only to accumulation, but to frugality. If a person
should at any time exceed in it, he can easily reform without
exposing himself to the censure of the public. To reduce .very
much the number of his servants, to reform his table from great
profusion, to great frugality, to lay down his equipage after he has
once set it up, are changes which cannot escape the observation of
hife neighbours, and which arc supposed to imply some acknow-
ledgment of preceding bad conduct. Few, therefore, of those who
have once been so unfortunate as to launch out too far into this
sort of expense, have afterwards the courage to reform, till ruin
and bankruptcy oblige them. But if a person has, at any time,
been at too great an expense in building, in furniture, in books or
pictures, no imprudence can be inferred from his changing his
conduct. These are things in which further expense is frequently
rendered unnecessary by former expense ; and when a person stops
short, he appears to do so, not because he has exceeded his fortune,
but because he has satisfied his fancy.

The expense, besides, that is laid out in durable commodities,
gives maintenance, commonly, to a greater number of people than
that which is employed in the most profuse hospitality. Of two
or three hundredweight of provisions, which may sometimes be
served up at a great festival, one half, perhaps, is thrown to the
dunghill, and there is always a great deal wasted and abused. But
if the expense of this entertainment had been employed in setting
to work masons, carpenters, upholsterers, mechanics, &c., a quantity
of provisions, of equal value, would have been distributed among a
still greater number of people, who would have bought them in
pennyworths and pound weights, and not have lost or thrown
away a single ounce of them. In the one way, besides, this
expense maintains productive, in the other unproductive hands.
In the one way, therefore, it increases, in the other it does not
increase, the exchangeable value of the annual produce of the lancl
and labour of the country.

I would not, however, by all this be understood to mean, that
the one species of expense always betokens a more liberal or

CHAP. iv. THE WEALTH OF NATIONS. 353

generous spirit than the other. When a man of fortune spends
his revemie chiefly in hospitality, he shares the greater part of it
with his friends and companions; but when he employs it in
purchasing such durable commodities, he often spends the whole
upon his own person, and gives nothing to anybody without an
equivalent. The latter species of expense, therefore, especially when
directed towards frivolous objects, the little ornaments of dress
and furniture, jewels, trinkets, gewgaws, frequently indicates, not
only a trifling, but a base and selfish disposition. All that I mean
is, that the one sort of expense, as it always occasions some
accumulation of valuable commodities, as it is more favourable to
private frugality, and, consequently, to the increase of the public
capital, and as it maintains productive, rather than unproductive
hands, conduces more than the other to the growth of public
opulence.

CHAPTER IV.

OF STOCK LENT AT INTEREST.

THE stock which is lent at interest is always considered as a
capital by the lender. He expects that in due time it is to be
restored to him, and that in the meantime the borrower is to pay
him a certain annual rent for the use of it. The borrower may use it
either as a capital, or as a stock reserved for immediate consumption.
If he uses it as a capital, he employs it in the maintenance of pro-
ductive labourers, who reproduce the value with a profit. He can,
in this case, both restore the capital and pay the interest without
alienating or encroaching upon any other source of revenue. If he
uses it as a stock reserved for immediate consumption, he acts the
part of a prodigal, and dissipates in the maintenance of the idle what
was destined for the support of the industrious. He can, in this
case, neither restore the capital nor pay the interest, without either
alienating or encroaching upon some other source of revenue, such
as the property or the rent of land.

The stock which is lent at interest is, no doubt, occasionally em-
ployed in both these ways, but in the former much more frequently

VOL. i. A a

354 THE NATURE AND CAUSES OF BOOK n.

than in the latter. The man who borrows in order to spend will
soon be ruined, and he who lends to him will generally have occasion
to repent of his folly. To borrow or to lend for such a purpose,
therefore, is in all cases, where gross usury is out of the question,
contrary to the interest of both parties ; and though it no doubt
happens sometimes that people do both the one and the other, yet,
from the regard that all men have for their own interest, we may
be assured that it cannot happen so very frequently as we are some-
times apt to imagine. Ask any rich man of common prudence, to
which of the two sorts of people he has lent the greater part of his
stock to those who, he thinks, will employ it profitably, or to those
who will spend it idly, and he will laugh at you for proposing the
question. Even among borrowers, therefore, not the people in the
world most famous for frugality, the number of the frugal and
industrious surpasses considerably that of the prodigal and idle.

The only people to whom stock is commonly lent, without their
being expected to make any very profitable use of it, are country
gentlemen who borrow upon mortgage. Even they scarce ever
borrow merely to spend. What they borrow, one may say, is com-
monly spent before they borrow it. They have generally consumed
so great a quantity of goods, advanced to them upon credit by
shopkeepers and tradesmen, that they find it necessary to borrow at
interest in order to pay the debt. The capital borrowed replaces
the capitals of those shopkeepers and tradesmen, which the country
gentlemen could not have replaced from the rents of their estates.
It is not properly borrowed in order to be spent, but in order to
replace a capital which had been spent before.

Almost all loans at interest are made in money, cither of paper,
or of gold and silver. But what the borrower really wants, and
what the lender really supplies him with, is, not the money, but the
money's worth, or the goods which it can purchase. If he wants
it as a stock for immediate consumption, it is those goods only
which he can place in that stock. If he wants it as a capital for
employing industry, it is from those goods only that the indus-
trious can be furnished with the tools, materials, and maintenance
necessary for carrying on their work. By means of the loan, the
lender, as it were, assigns to the borrower his right to a certain
portion of the annual produce of the land and labour of the country,
to be employed as the borrower pleases.

CHAP. iv. THE WEALTH OF NATIONS. 355

The quantity of stock, therefore, or, as it is commonly expressed,
of money which can be lent at interest in any country, is not
regulated by the value of the money, whether paper or coin, which
serves as the instrument of the different loans made in that country,
but by the value of that part of the annual produce which, as soon
as it comes either from the ground, or from the hands of the pro-
ductive labourers, is destined not only for replacing a capital, but
such a capital as the owner does not care to be at the trouble of
employing himself. As such capitals arc commonly lent out and
paid back in money, they constitute what is called the moneyed
interest. It is clistinct s not only from the landed, but from the
trading and manufacturing interests, as in these last the owners
themselves employ their own capitals. Even in the moneyed interest,
however, the money is, as it were, but the deed of assignment,
which conveys from one hand to another those capitals which the
owners do not care to employ themselves. Those capitals may be
greater in almost any proportion, than the amount of the money
which serves as the instrument of their conveyance; the same
pieces of money successively serving for many different loans, as
well as for many different purchases. A, for example, lends to W
a thousand pounds, with which W immediately purchases of B a
thousand pounds' worth of goods. B having no occasion for the
money himself, lends the identical pieces to X, with which X imme-
diately purchases of C another thousand pounds' worth of goods.
C in the same manner, and for the same reason, lends them to Y,
who again purchases goods with them of D. In this manner the
same pieces, cither of coin or of paper, may, in the course of a few
days, serve as the instrument of three different loans, and of three
different purchases, each of which is, in value, equal to the whole
amount of those pieces. What the three moneyed men, A, B, and C,
assign to the three borrowers, W, X, Y, is the power of making
those purchases. In this power consist both the value and the use
of the loans. The stock lent by the three moneyed men is equal to
the value of the goods which can be purchased with it, and is three
times greater than that of the money with which the purchases are
made. Those loans, however, may be all perfectly well secured, the
goods purchased by the different debtors being so employed as, in
due time, to bring back, with a profit, an equal value either of coin
or of paper. And as the same pieces of money can thus serve as

A a z

356 TEE NATURE AND CAUSES OF BOOKII.

the instrument of different loans to three, or, for the same reason,
to thirty times their value, so they may likewise successively serve
as the instrument of repayment.

A capital lent at interest may, in this manner, he considered as
an assignment from the lender to the borrower of a certain con-
siderable portion of the annual produce j upon condition that the
borrower in return shall, during the continuance of the loan,
annually assign to the lender a smaller portion, called the interest ;
and at thc^ end of it a portion equally considerable with that which
had originally been assigned to him, called the repayment. Though
money, either coin or paper, serves generally as the deed of assign-
ment both to the smaller, and to the more considerable portion, it is
itself altogether different from what is assigned by it.

In proportion as that share of the annual produce which, as soon
as it comes either from the ground, or from the hands of the pro-
ductive labourers, is destined for replacing a capital, increases in
any country, what is called the moneyed interest naturally increases
with it. The increase of those particular capitals from which the
owners wish to derive a revenue, without being at the trouble of
employing them themselves, naturally accompanies the general
increase of capitals ; or, in other words, as stock increases, the
quantity of stock to be lent at interest grows gradually greater
and greater.

As the quantity of stock to be lent at interest increases, the
interest, or the price which must be paid for the use of that stock,
necessarily diminishes, not only from those general causes which
make the market price of things commonly diminish as their
quantity increases, but from other causes which are peculiar to this
particular case. As capitals increase in any country, the profits
which can be made by employing them necessarily diminish. It
becomes gradually more and more difficult to find within the
country a profitable method of employing any new capital. There
arises in consequence a competition between different capitals, the
owner of one endeavouring to get possession of that employment
which is occupied by another. But upon most occasions he can
hope to justle that other out of this employment, by no other means
but by dealing upon more reasonable terms. He must not only
sell what he deals in somewhat cheaper, but, in order to get it to
sell, he must sometimes too buy it dearer. The demand for pro-

CHAP. iv. THR WEALTH OF NATIONS. 357

ductive labour, by the increase of the funds which are destined for
maintaining it, grows every day greater and greater. Labourers
easily find employment, but the owners of capitals find it difficult
to get labourers to employ. Their competition raises the wages of
labour, and sinks the profits of stock. But when the profits which
can be made by the use of a capital arc in this manner diminished,
as it were, at both ends, the price which can be paid for the use of
it, that is, the rate of interest, must necessarily be diminished with
them.

Mr. Locke, 1 Mr. Law, and M. Montesquieu, 2 as well as many
other writers, seem to have imagined that the increase of the
quantity of gold and silver, in consequence of the discovery of
the Spanish West Indies, was the real cause of the lowering of
the rate of interest through the greater part of Europe. Those
metals, they say, having become of less value themselves, the use
of any particular portion of them necessarily became of less value
too, and consequently the price which could be paid for it. This
notion, which at first sight seems so plausible, has been so fully
exposed by Mr. Hume, 3 that it is, perhaps, unnecessary to say
anything more about it. The following very short and plain
argument, however, may serve to explain more distinctly the fallacy
which seems to have misled those gentlemen.

Before the discovery of the Spanish West Indies, ten per cent,
seems to have been the common rate of interest through the greater
part of Europe. It has since that time in different countries sunk
to six, five, four, and three per cent. Let us suppose that in every
particular country the value of silver has sunk precisely in the same
proportion as the rate of interest, and that in those countries, for
example, where interest has been reduced from ten to five per cent.,
the same quantity of silver can now purchase just half the quantity
of goods which it could have purchased before. This supposition
will not, I believe, be found anywhere agreeable to the truth, but
it is the most favourable to the opinion which we are going to
examine ; and even upon this supposition it is utterly impossible
that the lowering of the value of silver could have the smallest
tendency to lower the rate of interest. If a hundred pounds are in

1 Considerations of the Lowering of In- 2 Esprit des Loix, liv. xxii. chap. vi.
terest and Baising the Value of Money, 8 Fourth Political Discourse on luter-
p. 6. est.

358 THE NATURE AND CAUSES OF BOOK n.

those countries now of no more value than fifty pounds were then,
ten pounds must now be of no more value than five pounds were
then. Whatever were the causes which lowered the value of the
capital, the same must necessarily have lowered that of the interest,
and exactly in the same proportion. The proportion between the
value of the capital and that of the interest must have remained
the same, though the rate had never been altered. By altering the
rate, on the contrary, the proportion between those two values is
necessarily altered. If a hundred pounds now are worth no more
than fifty were then, five pounds now can be worth no more than
two pounds ten shillings were then. By reducing the rate of
interest, therefore, from ten to five per cent., we give for the use of
a capital, which is supposed to be equal to one-half of its former
value, an interest which is equal to one-fourth only of the value of
the former interest.

Any increase in the quantity of silver, while that of the commo-
dities circulated by means of it remained the same, could have no
other effect than to diminish the value of that melal. The nominal
value of all sorts of goods would be greater, but their real value
would be precisely the same as before. They would be exchanged
for a greater number of pieces of silver ; but the quantity of labour
which they could command, the number of people whom they could
maintain and employ, would be precisely the same. The capital of
the country would be the same, though a greater number of pieces
might be requisite for conveying any equal portion of it from one
hand to another. The deeds of assignment, like the conveyances
of a verbose attorney, would be more cumbersome, but the thing
assigned would be precisely the same as before, and could produce
only the same effects. The funds for maintaining productive labour
being the same, the demand for it would be the same. Its price
or wages, therefore, though nominally greater, would really be the
same. They would be paid in a greater number of pieces of silver;
but they would purchase only the same quantity of goods. The
profits of stock would be the same both nominally and really. The
wages of labour are commonly computed by the quantity of silver
which is paid to the labourer. When that is increased, therefore,
his wages appear to be increased, though they may sometimes be
no greater than before. But the profits of stock are not computed
by the number of pieces of silver with which they are paid, but by

CHAP. iv. THE WEALTH OF NATIONS. 359

the proportion which those pieces bear to the whole capital employed.
Thus in a particular country five shillings a week are said to be the
common wages of labour, and ten per cent, the common profits of
stock. But the whole capital of the country being the same as
before, the competition between the different capitals of individuals
into which it was divided would likewise be the same. They would
all trade with the same advantages and disadvantages. The com-
mon proportion between capital and profit, therefore, would be the
same, and consequently the common interest of money; what can
commonly be given for the use of money being necessarily regulated
by what can commonly be made by the use of it.

Any increase in the quantity of commodities annually circulated
within the country, while that of the money which circulated them
remained the same, would, on the contrary, produce many other
important effects, besides that of raising the value of the money.
The capital of the country, though it might nominally be the same,
would really be augmented. It might continue to be expressed
by the same quantity of money, but it would command a greater
quantity of labour. The quantity of productive labour which it
could maintain and employ would be increased, and consequently
the demand for that labour. Its wages would naturally rise with
the demand, and yet might appear to sink. They might be paid
with a smaller quantity of money, but that smaller quantity might
purchase a greater quantity of goods than a greater had done
before. The profits of stock would be diminished both really and
in appearance. The whole capital of the country being augmented,
the competition between the different capitals of which it was
composed would naturally be augmented along with it. The
owners of those particular capitals would be obliged to content
themselves with a smaller proportion of the produce of that labour
which their respective capitals employed. The interest of money,
keeping pace always with the profits of stock, might, in this
manner, be greatly diminished, though the value of money, or
the quantity of goods which any particular sum could purchase,
was greatly augmented.

In some countries the interest of money has been prohibited
by law. But as something can everywhere be made by the use
of money, something ought everywhere to be paid for the use of
it. This regulation, instead of preventing, has been found from

360 THE NATURE AND CAUSES OF BOOK n.

experience to increase the evil of usury; the debtor being obliged
to pay, not only for the use of the money, but for the risk which
his creditor runs by accepting a compensation for that use. He
is obliged, if one may say so, to insure his creditor from the
penalties of usury.

In countries where interest is permitted, the law, in order to
prevent the extortion of usury, generally fixes the highest rate
which can be taken without incurring a penalty. This rate ought
always ta be somewhat above the lowest market price, or the price
which is commonly paid for the use of money by those who can
give the most undoubted security. If this legal rate should be
fixed below the lowest market rate, the effects of this fixation
must be nearly the same as those of a total prohibition of interest.
The creditor will not lend his money for less than the use of it
is worth, and the debtor must pay him for the risk which he
runs by accepting the full value of that use. If it is fixed pre-
cisely at the lowest market price, it ruins with honest people, who
respect the laws of their country, the credit of all those who cannot
give the very best security, and obliges them to have recourse to
exorbitant usurers. In a country, such as Great Britain, where
money is lent to Government at three per cent, and to private
people upon good security at four, and four and a half, the present
legal rate, five per cent., is, perhaps, as proper as any.

The legal rate, it is to be observed, though it ought to be
somewhat above, ought not to be much above the lowest market
rate. If the legal rate of interest in Great Britain, for example,
was fixed so high as eight or ten per cent., the greater part of
the money which was to be lent would be lent to prodigals and
projectors, who alone would be willing to give this high interest.
Sober people, who will give for the use of money no ihore than
a part of what they are likely to make by the use of it, would
not venture into the competition. A great part of the capital of
the country would thus be kept out of the hands which were most
likely to make a profitable and advantageous use of it, and thrown
into those which were most likely to waste and destroy it. Where
the legal rate of interest, on the contrary, is fixed but a very little
above the lowest market rate, sober people are universally pre-
ferred, as borrowers, to prodigals and projectors. The person who
lends money gets nearly as much interest from the former as he

CHAP. iv. THE WEALTH OF NATIONS. 361

dares to take from the latter, and his money is much safer in the
hands of the one set of people than in those of the other. A
great part of the capital of the country is thus thrown into the
hands in which it is most likely to be employed with advantage. 1

No law can reduce the common rate of interest below the
lowest ordinary market rate at the time when that law is made.
Notwithstanding the edict of 1766, by which the French king
attempted to reduce the rate of interest from five to four per cent.,
money continued to be lent in France at five per cent., the law
being evaded in several different ways.

The ordinary market price of land, it is to be observed, depends
everywhere upon the ordinary market rate of interest. The person
who has a capital from which he wishes to derive a revenue,
without taking the trouble to employ it himself, deliberates
whether he should buy land with it, or lend it out at interest.
The superior security of land, together with some other advantages
which almost everywhere attend upon this species of property, will
generally dispose him to content himself with a smaller revenue
from land than what he might have by lending out his money
at interest. These' advantages are sufficient to compensate a
certain difference of revenue ; but they will compensate a certain
difference only; and if the rent of land should fall short of the
interest of money by a greater difference, nobody would buy land,
which would soon reduce its ordinary price. On the contrary,
if the advantages should much more than compensate the dif-
ference, everybody would buy land, which again would soon raise
its ordinary price. When interest was at ten per cent., land was
commonly sold for ten and twelve years' purchase. 2 As interest
sunk to six, five, and four per cent., the price of land rose to
twenty, five and twenty, and thirty years' purchase. The market

1 It may be very well doubted whether it, suggest a high rate to the same Go-
a law which fixes a maximum rate of vernmen^ when it enters the market as
interest very much above the ordinary a borrower. But the effects of a low rate
market rate would have any effect at fixed by law are as Adam Smith has de-
all. Lenders do not accommodate bor- scribed them. Usury laws are abolished
rowers because the legal rate is high, but in the United Kingdom now, though
because they expect interest and repay- there is of course an equitable relief to
ment. Not that a Government would be debtors under certain circumstances,
very likely to fix the rate much above 2 Five hundred years ago land sold for
the market rate, because, though such an even less than this. See the Editor's
enactment might be wholly inoperative, Agriculture and Prices, vol. ii. p. 566,
it would, in the minds of those who fixed col, iii.

362

THE NATURE AND CAUSES OF

BOOK II.

rate of interest is higher in France than in England, and the
common price of land is lower. In England it commonly sells
at thirty, in France at twenty years' purchase. l

CHAPTER V.

OF THE DIFFERENT EMPLOYMENT OF CAPITALS. 2

rriHOUGH all capitals are destined for the maintenance of

JL productive labour only, yet the quantity of that labour,

which equal capitals are capable of putting into motion, varies

1 The rate of interest 011 all invest-
ments of equal security tends to an
equality. The rent of land in propor-
tion to its purchase-money is, however,
heightened by two causes. It has a
growing value, as is evidenced by the
Income-tax returns under Schedule B,
and its possession confers social position
and political intluence. On the other
hand, the difficulty attending its convey-
ance tends to depress its value and raiso
the rate of interest on the purchase-
money. It is certain, however, that the
latter depressing force is more than com-
pensated by the two causes which tend
to elevate it.

2 It is exceedingly important, in deal-
ing with the question discussed in the
following chapter, to recognise what
is the exact function of the capitalist
employer. Most writers on Political
Economy, misled by the fact that the
advances of the capitalist are the means
by which labour is for a certain present
period supported, have given excessive
prominence to the doctrine of a ' labour
fund,' and have exaggerated the import-
ance of this fund to those who live on
wages. The fact is the capitalist em-
ployer is nothing but a representative of
the division of labour ; or, as Mr. Wake-
field corrects the phrase, of employ-
ments.

The labour of a physician and that of
a carpenter are, equally, services prof-
fered in expectation of demand and com-

pensation. The remuneration of both is
determined by the same causes the wil-
lingness, namely, of the public to make
use of manufactured wood, and of medical
advice during sickness. The fact that a
capitalist interposes to continue and dis-
tribute the work of the latter, and does
not interpose to distribute the practice of
the former, is a mere accident of either
occupation. If physicians thought it
expedient, they might arrange with some
capitalist, who, on paying -them a fixed
sum by the week or the year, and thereby
securing them from the contingencies of
non-employment, might receive their fees.
That they do not make such an arrange-
ment is simply due to the fact that in
ordinary cases it is more to the purpose
to bring the labour of the physician into
direct contact with the demands of tho
public. There are occasions when the
capitalist does intervene between patient
and physician, as, for example, in the
agreement made between medical men
and poor-law guardians for the medical
relief of the poor ; and in the co-operative
arrangement by which clubs engage to
pay a poll-tax to a medical man on con-
dition that he administers his skill to
such patients in the club as require his
services.

The capitalist employer is a mere in-
termediary. He is of the greatest value
to the artisan, because he continues his
labour as long as it is demanded, and
steadies the market for his produce ; as

CHAP. V.

THE WEALTH OF NATIONS.

363

extremely according to the diversity of their employment; as does
likewise the value which that employment adds to the annual
produce of the land and labour of the country.

A capital may be employed in four different ways : either, first,
in procuring the rude produce annually required for the use and
consumption of the society; or, secondly, in manufacturing and
preparing that rude produce for immediate use and consumption ;
or, thirdly, in transporting either the rude or manufactured
produce from the places where they abound to those where they
are wanted; or, lastly, in dividing particular portions of either
into such small parcels as suit the occasional demands of those
who want them. In the first way are employed the capitals of
all those who undertake the improvement or cultivation of lands,
mines, or fisheries; in the second, those of all master manufac-
turers; in the third, those of all wholesale merchants; and in the

the corn-dealer steadies the market be-
tween the farmer and the consumer of
home produce. But his benefit to the
workman i distinctly limited to this
function. If the workman can get rid
of him, can find the capital needed for
continuity of labour, and for the main-
tenance of an average remunerative price,
he may dispense with the capitalist to his
own profit. This is the meaning of the
anticipated benefits to be derived from
that co-operative system of production
which has been attempted already, and
which will probably succeed after the
rectification of those mistakes in action
which flow from misinterpreting the value
of a capitalist's function in managing a
considerable concern. They who adopt
the system of co-operation are generally
disposed to undervalue the function of
supervision and management.

As the capitalist employer confers a
benefit on the producer by continuing
his work, and preventing excessive fluc-
tuations in the price of his product, so
he confers a benefit on the consumer by
the continuance of the supply which he
offers, and by the competition under which
he is forced (apart from any combination
on the part of similar capitalists) to offer
the product at the lowest market price.

In short, the advantage which the capi-
talist affords to the workman and the
public is intermediary and temporary.
Unless he advances the workman's wages,
he docs no more than pay the workman

for value received. Unless ho lends his
property to the consumer, that is, gives
him credit for the articles he consumes,
he does not do more than shorten the
trouble which a consumer has in finding
out the producer of the article which he
needs. In the ordinary course of retail
trade, enormous cost is incurred in in-
forming the consumer of the place in
which he can get what he wants, or in
tempting him to purchase what he does
not want.

The language commonly used as to
the beneficent operation of the capitalist,
and his supply of a labour fund, is
absurdly exaggerated. The person who
sustains labour is the consumer. The
capitalist is only a convenience to la-
bourer and consumer. This distinction,
is highly important. There is no fund,
except temporarily, between the capitalist .
and the labourer. Both .are paid wages,
one for producing, the other for dis-,
tributing; and the consumer pays the
wages of both. But there may be at
notable difference between labourer amt
consumer. The former niay demand
more than the latter can pay, and so*
commit an economical suicide. The
former may demand more than the
latter ought to pay, and yet be able to
extort his price. In this case, the latter
must stint his use of the products of
other labour. But in no case will tho
capitalist employer be a loser.

364 THE NATURE AND CAUSES OF BOOK n.

fourth, those of all retailers. It is difficult to conceive that a
capital should be employed in any way which may not be classed
under some one or other of those four. 1

Each of those four methods of employing a capital is essentially
necessary either to the existence or extension of the other three,
or to the general conveniency of the society.

Unless a capital was employed in furnishing rude produce to
a certain degree of abundance, neither manufactures nor trade of
any kind could exist. 2

Unless a capital was employed in manufacturing that part of
the rude produce which requires a good deal of preparation before
.it can be fit for use and consumption, it cither would never be
produced, because there could be no demand for it ; or, if it was
produced spontaneously, it would be of no value in exchange, and
could add nothing to the wealth of the society.

Unless a capital was employed in transporting, either the rude
or manufactured produce, from the places where it abounds to
those where it is wanted, no more of either could be produced
than was necessary for the consumption of the neighbourhood.
The capital of the merchant exchanges the surplus produce of one
place for another, and thus encourages the industry and increases
the enjoyments of both.

Unless a capital was employed in breaking and dividing certain
portions either of the rude or manufactured produce, into such
small parcels as suit the occasional demands of those who want
them, every man would be obliged to purchase a greater quantity
of the goods he wanted than his immediate occasions required.
If there was no such trade as a butcher, for example, every man
would be obliged to purchase a whole ox or a whole sheep at a
time. This would generally be inconvenient to the rich, and much
more So to the poor. If a poor workman was- obliged to purchase

1 Unless we are to exclude skilled t>been obtained by labour, but which are
labour from the catalogue of national not yet available for consumption, and
wealth, and deny the outlay devoted to will not be till they undergo further
the production of such labour the name manipulation. Thus wheat is raw pro-
of an investment of capital, we should duce, but wine is not. It will be plain
give a fifth head, since it is not easy to too that some objects are rude produce
determine under which of the preceding from one point of view, the contrary from
schedules such a form of expenditure another. Thus wine destined for the
would come. manufacture of brandy is of such a kind,

2 Kude produce appears to be those though if it be intended for immediate
objects of demand or utility which have consumption it is not.

CHAP. v. THE WEALTH OF NATIONS. 365

a month's or six months' provisions at a time, a great part of
the stock which he employs as a capital in the instruments of
his trade, or in the furniture of his shop, and which yields him
a revenue, he would be forced to place in that part of his stock
which is reserved for immediate consumption, and which yields
him no revenue. Nothing* can be more convenient for such a
person than to be able to purchase his subsistence from day to day,
or even from hour to hour, as he wants it. He is thereby enabled
to employ almost his whole stock as a capital. He is thus enabled
to furnish work to a greater value, and the profit, which he makes
by it in this way, much more than compensates the additional
price which the profit of the retailer imposes upon the goods. The
prejudices of some political writers against shopkeepers and trades-
men arc altogether without foundation. So far is it from being
necessary, either to tax them, or to restrict their numbers, that
they can never be multiplied so as to hurt the public, though
they may so as to hurt one another. The quantity of grocery
goods, for example, which can be sold in a particular town, is
limited by the demand of that town and its neighbourhood. The
capital, therefore, which can be employed in the grocery trade
cannot exceed what is sufficient to purchase that quantity. If
this capital is divided between two different grocers, their com-
petition will tend to make both of them sell cheaper than if it
were in the hands of one only; and if it were divided among
twenty, their competition would be just so much the greater, and
the chance of their combining together, in order to raise the price,
just so much the less. Their competition might perhaps ruin some
of themselves ; but to take care of this is the business of the
parties concerned, and it may safely be trusted to their discretion.
It can never hurt either the consumer or the producer ; on the
contrary, it must tend to make the retailers both sell cheaper and
buy dearer, than if the whole trade was monopolized by one or
two persons. Some of them, perhaps, may sometimes decoy a
weak customer to buy what he has no occasion for. This evil,
however, is of too little importance to deserve the public atten-
tion, nor would it necessarily be prevented by restricting their
numbers. It is not the multitude of ale-houses, to give the
most suspicious example, that occasions a general disposition to
drunkenness among the common people ; but that disposition

366 THE NATURE AND CAUSES OF BOOK. n.

arising from other causes necessarily gives employment to a
multitude of ale-houses. 1

The persons whose capitals are employed in any of those four
ways are themselves productive labourers. Their labour, when
properly directed, fixes and realises itself in the subject or vendible
commodity upon which it is bestowed, and generally adds to its
price the value at least of their own maintenance and consumption.
The profits of the farmer, of the manufacturer, of the merchant
and retailer, are all drawn from the price of the goods which the
two first produce, and the two last buy and sell. Equal capitals,
however, ' employed in each of those four different ways, will
immediately put into motion very different quantities of productive
labour, and augment too in very different proportions the value of
the annual produce of the land and labour of the society to which
they belong.

The capital of the retailer replaces, together with its profits, that
of the merchant of whom he purchases goods, and thereby enables
him to continue his business. The retailer himself is the only
productive labourer whom it immediately employs. In his profits
consists the whole value which its employment adds to the annual
produce of the land and labour of the society.

The capital of the wholesale merchant replaces, together with
their profits, the capitals of the farmers and manufacturers of whom
he purchases the rude and manufactured produce which he deals in,
and thereby enables them to continue their respective trades. It is
by this service chiefly that he contributes indirectly to support the
productive labour of the society, and to increase the value of its
annual produce. His capital employs too the sailors and carriers
who transport his goods from one place to another, and it augments
the price of those goods by the value, not only of his profits, but of
their wages. This is all the productive labour which it immediately

1 Adam Smith has stated the position, attention of political economists, and has

that competition in retail trade is sum- been designated competition for the

cient to reduce the price of the service field of business/ as contrasted with

rendered by the trader, with perhaps too ' competition in the field. 1 Under these

much breadth. It is possible for there circumstances, the profit of the retailer

to ho a formal, or even tacit understand- on cash transactions may be greatly in

ing among traders about prices, and for excess of the ordinary rate of profit

the competition among them to be re- though, were this not the case, the rate

stricted to securing customers. This is would tend on all sides, equal risks taken

notoriously the case with the book trade. into account, to an equality. See above

Such a competition has attracted the book i. chap. vii. p. 65.

CHAP. v. THE WEALTH OF 'NATIONS. 367

puts into motion, and all the value which it immediately adds to
the annual produce. Its operation in both these respects is a good
deal superior to that of the capital of the retailer.

Part of the capital of the master manufacturer is employed as
a fixed capital in the instruments of his trade, and replaces, together
with its profits, that of some other artificer of whom he purchases
them. Part of his circulating capital is employed in purchasing
materials, and replaces, with their profits, the capitals of the farmers
and miners of whom he purchases them. But a great part of it is
always, either annually or in a much shorter period, distributed
among the different workmen whom he employs. It augments the
value of those materials by their wages, and by their masters'
profits upon the whole stock of wages, materials, and instruments
of trade employed in the business. It puts immediately into
motion, therefore, a much greater quantity of productive labour,
and adds a much greater value to the annual produce of the land
and labour of the society, than an equal capital in the hands of any
wholesale merchant.

No equal capital puts into motion a greater quantity of pro-
ductive labour than that of the farmer. 1 Not only his labouring
servants, but his labouring cattle, are productive labourers. In
agriculture too nature labours along with man ; and though her
labour costs no expense, its produce has its value, as well as that
of the most expensive workmen. The most important operations
of agriculture seem intended, not so much to increase, though they
do that too, as to direct the fertility of nature towards the produc-
tion of the plants most profitable to man. A field overgrown with
briers and brambles may frequently produce as great a quantity of
vegetables as the best cultivated vineyard or corn-field. Planting
and tillage frequently regulate more than they animate the active
fertility of nature ; and after all their labour, a gi-eat part of the
work always remains to be done by her. The labourers and labouring

1 ' Mr. Malthus says : " It has been necessaries, conveniences, and enjoyments

justly observed by Adam Smith, that no of human life. One sot of necessaries

equal quantity of productive labour em- and conveniences admits of no coinpa-

ployed in manufactures can ever occasion rison with another set ; value in one

so great a reproduction as in agriculture." cannot be measured by any known

If Adam Smith speaks of value, he is standard ; it is differently estimated by

correct ; if he speaks of riches, which is different persons.' Ricardo's Political

the important point, he is mistaken, for Economy, chap, xxxii. last sentence,
he has defined riches to consist of the

368 THE NATURE AND CAUSES OF BOOK IT.

cattle, therefore, employed in agriculture, not only occasion, like
the workmen in manufactures, the reproduction of value equal to
their own consumption, or to the capital which employs them,
together with its owner's profits ; but of a much greater value.
Over and above the capital of the farmer and all its profits, they
regularly occasion the reproduction of the rent of the landlord.
This rent may be considered as the produce of those powers of
nature, the use of which the landlord lends to the farmer. It is
greater or smaller according to the supposed extent of those powers,
or, in other words, according to the supposed natural or improved
fertility of the land. It is the work of nature which remains after
deducting or compensating everything which can be regarded as
the work of man. It is seldom less than a fourth, and frequently
more than a third of the whole produce. No equal quantity of
productive labour employed in manufactures can ever occasion so.
great a reproduction. In them nature does nothing ; l man does
all ; and the reproduction must always be in proportion to the
strength of the agents that occasion it. The capital employed in
agriculture, therefore, not only puts into motion a greater quantity
of productive labour than any equal capital employed in manufac-
tures, but in proportion too to the quantity of productive labour
which it employs it adds a much greater value to the annual pro-
duce of the land and labour of the country, to the real wealth and
revenue of its inhabitants. Of all the ways in which a capital can
be employed, it is by far the most advantageous to the society.

The capitals employed in the agriculture and the retail trade of
any society must always reside within that society. Their employ-
ment is confined almost to a precise spot, to the farm, and to the
shop of the retailer. They must generally too, though there are
some exceptions to this, belong to resident members of the society.

The capital of a wholesale merchant, on the contrary, seems to
have no fixed or necessary residence anywhere, but may wander

1 Every one who has handled the text doctrines of the economists, partly in the

of Adam Smith has commented on this fact that, acute as he was, he recognised

singular error of the author. Of course the aid of nature only in its visible and

the manufacturer is as much engaged in spontaneous energies, and not in the other

appropriating natural forces as the agri- qualities and properties of matter. We

culturist can be, and is as much de- know now that the source of all produc-

pendent on the qualities of matter. But tion is motion, of motion force, of force,

the origin of Adam Smith's error is partly it appears, heat, this heat being derived,

to be found in his attachment to the mediately or immediately, from the sun.

CHAP. v. THE WEALTH OF NATIONS. 369

about from place to place, according as it can either buy cheap or
sell dear.

The capital of the manufacturer must no doubt reside where the
manufacture is carried on ; but where this shall be is not always
necessarily determined. It may frequently be at a great distance
both from the place where the materials grow, and from that where
the complete manufacture is consumed. Lyons is very distant both
from the places which afford the materials of its manufactures, and
from those which consume them. The people of fashion in Sicily
are clothed in silks made in other countries, from the materials
which their own produces. Part of the wool of Spain is manu-
factured in great Britain, and some part of that cloth is afterwards
sent back to Spain.

Whether the merchant whose capital exports the surplus produce
of any society be a native or a foreigner, is of very little import-
ance. If he is a foreigner, the number of their productive labourers
is necessarily less than if he had been a native by one man only;
and the value of their annual produce, by the profits of that one
man. The sailors or carriers whom he employs may still belong
indifferently either to his country, or to their country, or to some
third country, in the same manner as if he had been a native. The
capital of a foreigner gives a value to their surplus produce equally
with that of a native, by exchanging it for something for which
there is a demand at home. It as effectually replaces the capital of
the person who produces that surplus, and as effectually enables
him to continue his business; the service by which the capital of a
wholesale merchant chiefly contributes to support the productive
labour, and to augment the value of the annual produce of the
society to which he belongs.

It is of more consequence that the capital of the manufacturer
should reside within the country. It necessarily puts into motion
a greater quantity of productive labour, and adds a greater value
to the annual produce of the land and labour of the society. It
may, however, be very useful to the country, though it should not
reside within it. The capitals of the British manufacturers who
work up the flax and hemp annually imported from the coasts
of the Baltic, are surely very useful to the countries which produce
them. Those materials are a part of the surplus produce of those
countries which, unless it was annually exchanged for something

VOL. i. B b

370 THE NATURE AND GAUGES OF BOOK n.

which is in demand there, would be of no value, and would soon
cease to be produced. The merchants who export it, replace the
capitals of the people who produce it, and thereby encourage them
to continue the production ; and the British manufacturers replace
the capitals of those merchants.

A particular country, in the same manner as a particular person,
may frequently not have capital sufficient both to improve and
cultivate all its lands, to manufacture and prepare their whole rude
produce for immediate use and consumption, and to transport the
surplus part either of the rude or manufactured produce to those
distant markets where it can be exchanged for something for which
there is a demand at home. The inhabitants of many different
parts of Great Britain have not capital sufficient to improve and
cultivate all their lands. The wool of the southern counties of
Scotland is, a great part of it, after a long land carriage through
very bad roads, manufactured in Yorkshire, for want of a capital to
manufacture it at home. There are many little manufacturing
towns in Great Britain, of which the inhabitants have not capital
sufficient to transport the produce of their own industry to those
distant markets where there is demand and consumption for it. If
there are any merchants among them, they are properly only the
agents of wealthier merchants who reside in some of the greater
commercial cities.

When the capital of any country is not sufficient for all those
three purposes, in proportion as a greater share of it is employed in
agriculture, the greater will be the quantity of productive labour
which it puts into motion within the country, as will likewise be
the value which its employment adds to the annual produce of the
land and labour of the society. After agriculture, the capital em-
ployed in manufactures puts into motion the greatest quantity of
productive labour, and adds the greatest value to the annual pro-
duce. That which is employed in the trade of exportation has the
least effect of any of the three. 1

The country, indeed, which has not capital sufficient for all those
three purposes has not arrived at that degree of opulence for which
it seems naturally destined. To attempt, however, prematurely and
with an insufficient capital, to do all the three, is certainly not the
shortest way for a society, no more than it would be for an indi-
1 For a criticism on this section, see Ricardo's Political Economy, chap. xxvi.

CHAP. v. THE WEALTH OF NATIONS. 371

vidual, to acquire a sufficient one. The capital of all the individuals
of a nation has its limits in the same manner as that of a single
individual, and is capable of executing only certain purposes. The
capital of all the individuals of a nation is increased in the same
manner as that of a single individual, by their continually accu-
mulating and adding to it whatever they save out of their revenue.
It is likely to increase the fastest, therefore, when it is employed
in the way that affords the greatest revenue to all the inhabitants
of the country, as they will thus be enabled to make the greatest
savings. 1 But the revenue of all the inhabitants of the country is
necessarily in proportion to the value of the annual produce of their
land and labour.

It has been the principal cause of the rapid progress of our
American colonies towards wealth and greatness, that almost their
whole capitals have hitherto been employed in agriculture. They
have no manufactures, those household and coarser manufactures
cxcepted which necessarily accompany the progress of agriculture,
and which are the work of the women and children in every private
family. The greater part both of the exportation and coasting
trade of America is carried on by the capitals of merchants who
reside in Great Britain. Even the stores and warehouses from
which goods are retailed in some provinces, particularly in Virginia
and Maryland, belong many of them to merchants who reside in
the mother country, and afford one of the few instances of the retail
trade of a society being carried on by the capitals of those who are
not resident members of it. Were the Americans, either by com-
bination or by any other sort of violence, to stop the importation
of European manufactures, and, by thus giving a monopoly to such
of their own countrymen as could manufacture the like goods,
divert any considerable part of their capital into this employment,
they would retard instead of accelerating the further increase in

1 The importance of this position, nomical grounds only that they defend

which contains the genii of the argument the practice, but on political and social,

available for the refutation of what is These grounds, however, are not capable

called Protection, is manifest. The in- of refutation, nor indeed of proof. No

habitants of the United States and the one can assert and no ons can deny that

British colonies have systematically ig- the distribution of employments has been

nored this rule, and there can be little aided or hindered by protective regnla-

doubt that the material progress of these tions, because these regulations may have

countries has been adversely affected by destroyed quite as much as they seem to

the economical heresies which they have have created,
embraced. It is not, however, on eco-

B b Z

372 THE NATURE AND CAUSES OF BOOK n.

the value of their annual produce, and would obstruct instead of
promoting the progress of their country towards real wealth and
greatness. This would be still more the case were they to attempt,
in the same manner, to monopolize to themselves their whole ex-
portation trade.

The course of human prosperity, indeed, seems scarce ever to
have been of so long continuance as to enable any great country
to acquire capital sufficient for all those three purposes ; unless,
perhaps, we give credit to the wonderful accounts of the wealth
and cultivation of China, of those of ancient Egypt, and of the an-
cient state 'of Hindostan. Even those three countries, the wealthiest,
according to all accounts, that ever were in the world, are chiefly
renowned for their superiority in agriculture and manufactures.
They do not appear to have been eminent for foreign trade. The
ancient Egyptians had a superstitious antipathy to the sea ; l a super-
stition nearly of the same kind prevails among the Indians ; and
the Chinese have never excelled in foreign commerce. The greater
part of the surplus produce of all those three countries seems to
have been always exported by foreigners, who gave in exchange for
it something else for which they found a demand there, frequently
gold and silver.

It is thus that the same capital will in any country put into
motion a greater or smaller quantity of productive labour, and add
a greater or smaller value to the annual produce of its land and
labour, according to the different proportions in which it is employed
in agriculture, manufactures, and wholesale trade. The difference
too is very great, according to the different sorts of wholesale trade
in which any part of it is employed.

All wholesale trade, all buying in order to sell again by whole-
sale, may be reduced to three different sorts the home trade, the
foreign trade of consumption, and the carrying trade. The home
trade is employed in purchasing in one part of the same country,

1 I am not acquainted with the au- largest contingent after Phoenicia. The

thority on which this assertion is made. same author tells us (viii. 17) that the

Under Neco, Kgypt possessed a naval Egyptians at the battle of Artemisium

force (Herod, ii. 159). Under Apries were the most distinguished among the

(Herod, ii. 161) she fought with Phoenicia. naval forces of Xerxes. (See Jlawlinson's

Under Amasis (Herod, ii. 182) she took Herodotus, vol. i. p. 168 ; vol. iv. p. 279.)

Cyprus. During the Persian wars she It is not reasonable to believe that men

was engaged (Herod, vi. 6) against the who were good sailors had an antipathy

lonians, and again in the expedition of to the sea, or were unacquainted with

Xerxes (Herod, vii. 89) she supplied the commerce.

CHAP. v. THE WEALTH OF NATIONS. 373

and selling in another, the produce of the industry of that country.
It comprehends both the inland and the coasting trade. The
foreign trade of consumption is employed in purchasing foreign
goods for home consumption ; the carrying trade is employed in
transacting the commerce of foreign countries, or in carrying the
surplus produce of one to another.

The capital which is employed in purchasing in one part of the
country, in order to sell in another the produce of the industry of
that country, generally replaces by every such operation two
distinct capitals that had both been employed in the agriculture
or manufactures of that country, and thereby enables them to
continue that employment. When it sends out from the residence
of the merchant a certain value of commodities, it generally brings
back in return at least an equal value of other commodities. When
both are the produce of domestic industry, it necessarily replaces
by every such operation two distinct capitals, which had both been
employed in supporting productive labour, and thereby enables
them to continue that support. The capital which sends Scotch
manufactures to London, and brings back English corn and manu-
factures to Edinburgh, necessarily replaces by every such operation
two British capitals which had both been employed in the agri-
culture or manufactures of Great Britain.

The capital employed in purchasing foreign goods for home
consumption, when this purchase is made with the produce of
domestic industry, replaces too, by every such operation, two
distinct capitals ; but one of them cnty is employed in supporting
domestic industry. The capital which sends British goods to
Portugal, and brings back Portuguese goods to Great Britain,
replaces by every such operation only one British capital ; the
other is a Portuguese one. Though the returns, therefore, of the
foreign trade of consumption should be as quick as those of
the home trade, the capital employed in it will give but one-half
the encouragement to the industry or productive labour of the
country. 1

But the returns of the foreign trade of consumption are very
seldom so quick as those of the home trade. The returns of the
home trade generally come in before the end of the year, and some-

1 See again Ricardo's Political Economy, chap. xxvi.

374 THE NATURE AND CAUSES OF BOOK n.

times three or four times in the year, The returns of the foreign
trade of consumption seldom come in before the end of the year,
and sometimes not till after two or three 3 r ears. A capital, there-
fore, employed in the home trade will sometimes make twelve
operations, or be sent out and returned twelve times, before a
capital employed in the foreign trade of consumption has made
one. If the capitals are equal, therefore, the one will give four
and twenty times more encouragement and support to the industry
of the country than the other.

The foreign goods for home consumption may sometimes be
purchased, not with the produce of domestic industry, but with
some other foreign goods. These last, however, must have been
purchased cither immediately with the produce of domestic industry,
or with something else that had been purchased with it ; for, the
case of war and conquest excepted, foreign goods can never be
acquired but in exchange for something that had been produced
at home, either immediately or after two or more different ex-
changes. The effects, therefore, of a capital employed in such a
round-about foreign trade of consumption, are in every respect the
same as those of one employed in the most direct trade of the same
kind, except that the final returns are likely to be still more distant,
as they must depend upon the returns of two or three distinct
foreign trades. If the flax and hemp of Riga are purchased with
the tobacco of Virginia, which had been purchased with British
manufactures, the merchant must wait for the returns of two
distinct foreign trades before he can employ the same capital in
re-purchasing a like quantity of British manufactures. If the
tobacco of Virginia had been purchased, not with British manu-
factures, but with the sugar and rum of Jamaica which had been
purchased with those m ami faetures, he must wait for the returns
of three. If those two or three distinct foreign trades should
happen to be carried on by two or three distinct merchants, of
whom the second buys the goods imported by the first, and the
third buys those imported by the second, in order to export them
again, each merchant indeed will in this case receive the returns
of his own capital more quickly ; but the final returns of the whole
capital employed in the trade will be just as slow as ever. Whether
the whole capital employed in such a round-about trade belong to
one merchant or to three, can make no difference with regard to

CHAP. v. THE WEALTH OF NATIONS. 375

the country, though it may with regard to the particular merchants.
Three times a greater capital must in both cases be employed,
in order to exchange a certain value of British manufactures for
a certain quantity of flax and hemp, than would have been neces-
sary had the manufactures and the flax and hemp been directly
exchanged for one another. The whole capital employed, therefore,
in such a round-about foreign trade of consumption, will generally
give less encouragement and support to the productive labour of
the country than an equal capital employed in a more direct trade
of the same kind.

Whatever be the foreign commodity with which the foreign
goods for home consumption are purchased, it can occasion no
essential difference either in the nature of the trade, or in the
encouragement and support which it can give to the productive
labour of the country from which it is carried on. If they are
purchased with the gold of Brazil, for example, or with the silver
of Pern, this gold and silver, like the tobacco of Virginia, must have
been purchased with something that either was the produce of the
industry of the country, or that had been purchased with something
else that was so. So far, therefore, as the productive labour of the
country is concerned, the foreign trade of consumption which is
carried on by means of gold and silver, has all the advantages and
all the inconveniences of any other equally round-about foreign
trade of consumption, and will replace just as fast or just as slow
the capital which is immediately employed in supporting that pro-
ductive labour. It seems even to have one advantage over any
other equally round-about foreign trade. The transportation of
those metals from one place to another, on account of their small
bulk and great value, is less expensive than that of almost any
other foreign goods of equal value. Their freight is much less,
and their insurance not greater ; and no goods, besides, are less
liable to suffer by the carriage. An equal quantity of foreign
goods, therefore, may frequently be purchased with a smaller
quantity of the produce of domestic industry, by the intervention
of gold and silver, than by that of any other foreign goods. The
demand of the country may frequently, in this manner, be supplied
more completely and at a smaller expense than in any other.
Whether, by the continual exportation of those metals, a trade
of this kind is likely to impoverish the country from which it is

876 THE NATURE AND CAUSES OF BOOKII.

carried on, in any other way, I shall have occasion to examine
at great length hereafter.

That part of the capital of any country which is employed in
the carrying trade, is altogether withdrawn from supporting the
productive labour of that particular country, to support that of
some foreign countries. Though it may replace by every operation
two distinct capitals, yet neither of them belongs to that particular
country. The capital of the Dutch merchant, which carries the
corn of Poland to Portugal, and brings back the fruits and wines
of Portugal to Poland, replaces by every such operation two
capitals, nfeither of which had been employed in supporting the
productive labour of Holland ; but one of them in supporting that
of Poland, and the other that of Portugal. The profits only return
regularly to Holland, and constitute the whole addition which
this trade necessarily makes to the annual produce of the land
and labour of that country. When, indeed, the carrying trade of
any particular country is carried on with the ships and sailors
of that country, that part of the capital employed in it which
pays the freight is distributed among and puts into motion a
certain number of productive labourers of that country. Almost
all nations that have had any considerable share of the carrying
trade have, in fact, carried it on in this manner. The trade itself
has probably derived its name from it, the people of such countries
being the carriers to other countries. It does not, however, seem
essential to the nature of the trade that it should be so. A Dutch
merchant may, for example, employ his capital in transacting the
commerce of Poland and Portugal, by carrying part of the surplus
produce of the one to the oilier, not in Dutch, but in British
bottoms. It may be presumed that he actually does so upon some
particular occasions. It is upon this account, however, that the
carrying trade has been supposed peculiarly advantageous to such
a country as Great Britain, of which the defence and security
depend upon the number of its sailors and shipping. But the
same capital may employ as many sailors and shipping, either in
the foreign trade of consumption, or even in the home trade,
when carried on by coasting vessels, as it could in the carrying
trade. The number of sailors and shipping which any particular
capital can employ docs not depend upon the nature of the trade,
but partly upon the bulk of the goods in proportion to their value,

CHAP. v. THE WEALTH OF NATIONS. 377

and partly upon the distance of the ports between which they are
to be carried ; chiefly upon the former of those two circumstances.
The coal trade from Newcastle to London, for example, employs
more shipping than all the carrying* trade of England, though the
ports are at no great distance. To force, therefore, by extraordinary
encouragements, a larger share of the capital of any country into
the carrying trade than what would naturally go to it, will not
always necessarily increase the shipping of that country.

The capital, therefore, employed in the home trade of any
country will generally give encouragement and support to a greater
quantity of productive labour in that country, and increase the
value of its annual produce more than an equal capital employed in
the foreign trade of consumption ; and the capital employed in this
latter trade has in both these respects a still greater advantage over
an equal capital employed in the carrying trade. The riches, and,
so far as power depends upon riches, the power of every country,
must always be in proportion to the value of its annual produce, the
fund from which all taxes must ultimately be paid. But the great
object of the political economy of every country is to increase the
riches and power of that country. It ought, therefore, to give no
preference nor superior encouragement to the foreign trade of con-
sumption above the home trade, nor to the carrying trade above
either of the other two. It ought neither to force nor to allure into
either of those two channels a greater share of the capital of the
country than what would naturally flow into them of its own
accord.

Each of those different branches of trade, however, is not only
advantageous, but necessary and unavoidable, when the course of
things, without any constraint or violence, naturally introduces it.

When the produce of any particular branch of industry exceeds
what the demand of the country requires, the surplus must be sent
abroad, and exchanged for something for which there is a demand
at home. Without such exportation, a pavt of the productive
labour of the country must cease, and the value of its annual
produce diminish. The land and labour of Great Britain produce
generally more corn, woollens, and hardware, than the demand
of the home market requires. The surplus part of them, therefore,
must be sent abroad, and exchanged for something for which there
is a demand at home. It is only by means of such exportation

378 TflE NATURE AND CAUSES OF BOOK n.

that tins surplus can acquire a value sufficient to compensate the
labour and expense of producing it. The neighbourhood of the sea
coast, and the banks of all navigable rivers, are advantageous
situations for industry, only because they facilitate the exportation
and exchange of such surplus produce for something else which
is more in demand there.

When the foreign goods which are thus purchased with the
surplus produce of domestic industry exceed the demand of the
home market, the surplus part of them must be sent abroad again,
and exchanged for something more in demand at home. About
ninety-six thousand hogsheads of tobacco are annually purchased in
Virginia and Maryland, with a part of the surplus produce of
British industry. But the demand of Great Britain does not
require, perhaps, more than fourteen thousand. If the remaining
eighty-two thousand, therefore, could not be sent abroad and
exchanged for something more in demand at home, the import-
ation of them must cease immediately, and with it the productive
labour of all those inhabitants of Great Britain, who are at present
employed in preparing the goods with which these eighty- two
thousand hogsheads are annually purchased. Those goods, which
are part of the produce of the land and labour of Great Britain,
having no market at home, and being deprived of that whirh they
had abroad, must cease to be produced. The most round-about
foreign trade of consumption, therefore, may, upon some occasions,
be as necessary for supporting the productive labour of the country,
and the value of its annual produce, as the most direct.

When the capital stock of any country is increased to such a
degree, that it cannot be all employed in supplying the con-
sumption, and supporting the productive labour of that particular
country, the surplus part of it naturally disgorges itself into the
carrying trade, and is employed in performing the same offices to
other countries. The carrying trade is the natural effect and
symptom of great national wealth ; but it does not seem to be the
natural cause of it. 1 Those statesmen who have been disposed

1 No doubt a wealthy country will Sweden has a large and increasing mer-

deyote its overplus to a carrying trade, cantile marine engaged in this kind of

as it will to any industry in which it can occupation. But Sweden is not in any

advantageously engage. But it does not sense of tho word a wealthy country,

follow that countries where carry ing trade though a portion of its wealth is most

is considerable are therefore wealthy. It advantageously employed in the trade

is reported that at the present time (1 880) referred to.

CHAP. v. THE WEALTH OF NATIONS. 379

to favour it with particular encouragements, seem to have mistaken
the effect and symptom for the cause. Holland, in proportion
to the extent of the land and the number of its inhabitants, by far
the richest country in Europe, has, accordingly, the greatest share
of the carrying trade of Europe. England, perhaps the second
richest country of Europe, is likewise supposed to have a consider-
able share of it ; though what commonly passes for the carrying
trade of England will frequently, perhaps, be found to be no more
than a round-about foreign trade of consumption. Such are, in
a great measure, the trades which carry the goods of the East
and Webt Indies, and of America, to different European markets.
Those goods are generally purchased either immediately with the
produce of British industry, or with something else which had been
purchased with that produce, and the final return of those trades
are generally need or consumed in Great Britain. The trade which
is carried on in British bottoms between the different ports of the
Mediterranean, and some trade of the same kind carried on by
British merchants between the different ports of India, make,
perhaps, the principal branches of what is properly the carrying
trade of Great Britain.

The extent of the home trade and of the capital which can be
employed in it, is necessarily limited by the value of the surplus
produce of all those distant places within the country which have
occasion to exchange their respective productions with one another ;
that of the foreign trade of consumption, by the value of the
surplus produce of the whole country and of what can be purchased
with it ; that of (he carrying trade, by the value of the surplus
produce of all the different countries in the world. Its possible
extent, therefore, is in a manner infinite in comparison of that of
the other two, and is capable of absorbing the greatest capitals.

The consideration of his own private profit is the sole motive
which determines the owner of any capital to employ it either
in agriculture, in manufactures, or in some particular branch of the
wholesale or retail trade. The different quantities of productive
labour which it may put into motion, and the different values which
it may add to the annual produce of the land and labour of the
society, according as it is employed in one or other of those dif-
ferent ways, never enter into his thoughts. In countries, therefore,
where agriculture is the most profitable of all employments, and

380 THE NATURE AND CAUSES, &c.

farming and improving the most direct roads to a splendid fortune,
the capitals of individuals will naturally be employed in the manner
most advantageous to the whole society. The profits of agriculture,
however, seem to have no superiority over those of other employ-
ments in any part of Europe. Projectors, indeed, in every corner
of it, have within these few years amused the public with most
magnificent accounts of the profits to be made by the cultivation
and improvement of land. Without entering into any particular
discussion of their calculations, a very simple observation may
satisfy ug that the result of them must be false. We see every day
the most splendid fortunes that have been acquired in the course of
a single life by trade and manufactures, frequently from a very
small capital, sometimes from no capital. 1 A single instance of
such a fortune acquired by agriculture in the same time, and from
such a capital, has not, perhaps, occurred in Europe during the
present century. In all the great countries of Europe, however,
much good land still remains uncultivated, and the greater part
of what is cultivated is far from being improved to the degree
of which it is capable. Agriculture, therefore, is almost every-
where capable of absorbing a much greater capital than has ever
yet been employed in it. What circumstances in the policy of
Europe have given the trades which arc carried on in towns so great
an advantage over that which is carried on in the country, that
private persons frequently find it more for their advantage to
employ their capitals in the most distant carrying trades of Asia
and America than in the improvement and cultivation of the most
fertile fields in their own neighbourhood, I shall endeavour to
explain at full length in the two following- books.

1 Many reasons may be given in expla- turer may be increased indefinitely ; but

nation of the fact which Smith has stated land, which is the instrument of agri-

in somewhat exaggerated language. The culture, is limited in amount. Besides, all

most obvious are, that the agriculturist the profits of the manufacturer, as long

cannot multiply indefinitely the extent as ho can command the market, are his

of his operations as the manufacturer can, own, those of the agriculturist are shared

whose work is carried on in a limited by the landlord. But landlords have

area, every part of which is easily acces- made ' splendid fortunes ' out of their

sible, and so capable of continual super- increasing rents,
vision. Again, the capital of a manufac-

BOOK III.

OF THE DIFFERENT PROGRESS OF OPULENCE IN DIFFERENT

NATIONS.

CHAPTER I.

OF THE NATURAL PROGRESS OF OPULENCE.

THE great commerce of every civilised society, is that carried
on between the inhabitants of the town and those of the
country. It consists in the exchange of rude for manufactured
produce, either immediately, or by the intervention of money, or
of some sort of paper which represents money. The country sup-
plies the town with the means of subsistence, and the materials
for manufacture. The town repays this supply by sending back
a part of the manufactured produce to the inhabitants of the
country. The town, in which there neither is nor can be any
reproduction of substances, may very properly be said to gain its
whole wealth and subsistence from the country. We must not,
however, upon this account, imagine that the gain of the town
is the loss of the country. The gains of both are mutual and
reciprocal, and the division of labour is in this, as in all other
cases, advantageous to all the different persons employed in the
various occupations into which it is subdivided. The inhabitants
of the country purchase of the town a greater quantity of manu-
factured goods, with the produce of a much smaller quantity of
their own labour, than they must have employed had they at-
tempted to prepare them themselves. The town affords a market for
the surplus produce of the country, or what is over and above the
maintenance of the cultivators, and it is there that the inhabitants
of the country exchange it for something else which is in demand
among them. The greater the number and revenue of the in-
habitants of the town, the more extensive is the market which it
affords to those of the country; and the more extensive that market,
it is always the more advantageous to a greater number. The corn
which grows within a mile of the town, sells there for the same

382 THE NATURE AND CAUSES OF BOOK m.

price with that which comes from twenty miles distance. But
the price of the latter must generally not only pay the expense
of raising and bringing it to market, but afford too the ordinary
profits of agriculture to the farmer. The proprietors and culti-
vators of the country, therefore, which lies in the neighbourhood
of the town, over and above the ordinary profits of agriculture,
gain, in the price of what they sell, the whole value of the carriage
of the like produce that is brought from more distant parts, and
they save, besides, the whole value of this carriage in the price
of what they buy. Compare the cultivation of the lands in the
neighbourhood of any considerable town with that of those which
lie at some distance from it, and you will easily satisfy yourself
how much the country is benefited by the commerce of the town.
Among all the absurd speculations that have been propagated con-
cerning the balance of trade, it has never been pretended that
either the country loses by its commerce with the town, or the
town by that with the country which maintains it.

As subsistence is, in the nature of things, prior to conveniency
and luxury, so the industry which procures the former must
necessarily be prior to that which ministers to the latter. The
cultivation and improvement of the country, therefore, which affords
subsistence, nrust, necessarily, be prior to the increase of the town,
which furnishes only the means of conveniency and luxury. It is
the surplus produce of the country only, or what is over and above
the maintenance of the cultivators, that constitutes the subsistence
of the town, which can therefore increase only with the increase
of this surplus produce. The town, indeed, may not always derive
its whole subsistence from the country in its neighbourhood, 01
even from the territory to which it belongs, but from very distant
countries ; and this, though it forms no exception from the general
rule, has occasioned considerable variations in the progress of opu-
lence in different ages and nations.

That order of things which necessity imposes in general, though
not in every particular country, is, in every particular country,
promoted by the natural inclinations of man. If human institu-
tions had never thwarted those natural inclinations, the towns
could nowhere have increased beyond what the improvement and
cultivation of the territory in which they were situated could
support, till such time, at least, as the whole of that territory

CHAP. i. THE WEALTH OF NATIONS. 383

was completely cultivated and improved. Upon equal, or nearly
equal profits, most men will choose to employ their capitals rather
in the improvement and cultivation of land, than either in manufac-
tures or in foreign trade. The man who employs his capital in
land, has it more under his view and command, and his fortune
is much less liable to accidents than that of the trader, who is
obliged frequently to commit it, not only to the winds and the
waves, but to the more uncertain elements of human folly and
injustice, by giving great credits in distant countries to men with
whose character and situation he can seldom be thoroughly ac-
quainted. The capital of the landlord, on the contrary, which is
fixed in the improvement of his land, seems to be as well secured
as the nature of human affairs can admit of. The beauty of the
country besides, the pleasures of a country life, the tranquillity of
mind which it promises, and wherever the injustice of human
laws does not disturb it, the independency which it really affords,
have charms that more or less attract everybody; and as to
cultivate the ground was the original destination of man, so in
every stage of his existence he seems to retain a predilection for
this primitive employment.

Without the assistance of some artificers, indeed, the cultivation
of land cannot be carried on but with great inconveniency and
continual interruption. Smiths, carpenters, wheelwrights and
ploughwrights, masons and bricklayers, tanners, shoemakers and
tailors, are people whose service the farmer has frequent occasion
for. 1 Such artificers too stand, occasionally, in need of the assist-
ance of one another ; and as their residence is not, like that ot
the former, necessarily tied down to a precise spot, they naturally
settle in the neighbourhood of one another, and thus form a small
town or village. The butcher, the brewer, and the baker, soon
join them, together with many other artificers and retailers, neces-
sary or useful for supplying their occasional wants, and who con-
tribute still further to augment the town. The inhabitants of
the town and those of the country are mutually the servants ot

1 The distribution of these emnloy- exist in the time when surnames origin-

incuts is indicated by the frequency of ated, and some were rare. Thus bricks

sin names derived from occupation. Every do not seem to have been manufactured

village in the middle ages had its smith, in England till the middle of the fifteenth

and hence the commonness of this name. century.
Some of these callings, however, did not

384 THE NATURE AND CAUSES OF BOOK in.

one another. The town is a continual fair or market, to which
the inhabitants of the country resort in order to exchange their
rude for manufactured produce. It is this commerce which sup-
plies the inhabitants of the town both with the materials of their
work, and the means of their subsistence. The quantity of the
finished work which they sell to the inhabitants of the country,
necessarily regulates the quantity of the materials and provisions
which they buy. Neither their employment nor subsistence, there-
fore, can augment, but in proportion to the augmentation of the
demand fuom the country for finished work; and this demand
can augment only in proportion to the extension of improvement
and cultivation. Had human institutions, therefore, never dis-
turbed the natural course of things, the progressive wealth and
increase of the towns would, in every political society, be con-
sequential, and in proportion to the improvement and cultivation
of the territory or country.

In our North American colonies, where uncultivated land is still
to be had upon easy terms, no manufactures for distant sale have
ever yet been established in any of their towns. When an artificer
has acquired a little more stock than is necessary for carrying
on his own business in supplying the neighbouring country, he
does not, in North America, attempt to establish with it a manu-
facture for more distant sale, but employs it in the purchase and
improvement of uncultivated land. From artificer he becomes
planter, and neither the large wages nor the easy subsistence which
that country affords to artificers, can bribe him rather to work
for other people than for himself. He feels that an artificer is
the servant of his customers, from whom he derives his subsistence ;
but that a planter who cultivates his own land, and derives his
necessary subsistence from the labour of his own family, is really
a master, and independent of all the world.

In countries, on the contrary, where there is either no uncultivated
land, or none that can be had upon easy terms, every artificer
who has acquired more stock than he can employ in the occasional
jobs of the neighbourhood, endeavours to prepare work for more
distant sale. The smith erects some sort of iron, the weaver some
sort of linen or woollen manufactory. Those different manufactures
come, in process of time, to be gradually subdivided, and thereby
improved and refined in a great variety of ways, which may easily

CHAP. i. THE WEALTH OF NATIONS. 385

be conceived, and which it is therefore unnecessary to explain any
further.

In seeking for employment to a capital, manufactures are, upon
equal or nearly equal profits, naturally preferred to foreign com-
merce, for the same reason that agriculture is naturally preferred to
manufactures. As the capital of the landlord or farmer is more
secure than that of the manufacturer, so the capital of the manu-
facturer, being at all times more within his view and command,
is more secure than that of the foreign merchant. In every period,
indeed, of every society, the surplus part both of the rude and
manufactured produce, or that for which there is no demand at
home, must be sent abroad in order to be exchanged for some-
thing for which there is some demand at home. But whether
the capital, which carries this surplus produce abroad, be a
foreign or a domestic one, is of very little importance. If the
society has not acquired sufficient capital both to cultivate all its
lands, and to manufacture in the cornpletest manner the whole of
its rude produce, there is even a considerable advantage that that
rude produce should be exported by a foreign capital, in order that
the whole stock of the society may be employed in more useful
purposes. The wealth of ancient Egypt, that of China and Hin-
dostan, sufficiently demonstrate that a nation may attain a very
high degree of opulence, though the greater part of its exporta-
tion trade be carried on by foreigners. The progress of our North
American and West Indian colonies would have been much less
rapid had no capital but what belonged to themselves been employed
in exporting their surplus produce.

According to the natural course of things, therefore, the greater
part of the capital of every growing society is, first, directed to
agriculture, afterwards to manufactures, and last of all to foreign
commerce. This order of things is so very natural, that in every
society that had any territory, it has always, I believe, been in
some degree observed. Some of their lands must have been culti-

o

vated before any considerable towns could have been established,
and some sort of coarse industry of the manufacturing kind must
have been carried on in those towns before they could well think
of employing themselves in foreign commerce.

But though this natural order of things must have taken place
in some degree in every such society, it has, in all the modern

VOL. i. c c

386 THE NATURE AND CAUSES OF BOOKIII.

states of Europe, been, in many respects, entirely inverted. The
foreign commerce of some of their cities has introduced all their
finer manufactures, or such as were fit for distant sale ; and manu-
factures and foreign commerce together have given birth to the
principal improvements of agriculture. The manners and customs
which the nature of their original government introduced, and
which remained after that government was greatly altered, neces-
sarily forced them into this unnatural and retrograde order.

CHAPTER II.

01' THE DISCOURAGEMENT OF AGRICULTURE IN THE ANCIENT STATE
OF EUROPE AFTER THE FALL OF THE ROMAN EMPIRE.

WHEN the German and Scythian nations overran the
western provinces of the Roman Empire, the confusions
which followed so great a revolution lasted for several centuries. 1
The rapine and violence which the barbarians exercised against
the ancient inhabitants, interrupted the commerce between the
towns and the country. The towns were deserted, and the country
was left uncultivated, and the western provinces of Europe, which
had enjoyed a considerable degree of opulence under the Roman
empire, sunk into the lowest state of poverty and barbarism-
During the continuance of those confusions, the chiefs and prin-
cipal leaders of those nations acquired or usurped to themselves
the greater part of the lands of those countries. A great part
of them was uncultivated ; but no part of them, whether culti-
vated or uncultivated, was left without a proprietor. All of them
were engrossed, and the greater part by a few great proprietors.

This original engrossing of uncultivated lands, though a great,
might have been but a transitory evil. They might soon have
been divided again, and broke into small parcels either by succes-
sion or by alienation. The law of primogeniture hindered them

1 For an account of the effects in- see Guizot's History of Civilisation in
duccd by the conquest of Roman Gaul, France, vol. i.

CHAP. ii. THE WEALTH OF NATIONS. 387

from being divided by succession : the introduction of entails pre-
vented their being broke into small parcels by alienation.

When land, like moveables, is considered as the means only of
subsistence and enjoyment, the natural law of succession divides it,
like them, among all the children of the family; of all of whom
the subsistence and enjoyment may be supposed equally dear to the
father. This natural law of succession accordingly took place
among the Romans, who made no more distinction between elder
and younger, between male and female, in the inheritance of lands,
than we do in the distribution of moveables. But when land was
considered as the means, not of subsistence merely, but of power
and protection, it was thought better that it should descend un-
divided to one. In those disorderly times, every great landlord
was a sort of petty prince. His tenants were his subjects. He
was their judge, and in some respects their legislator in peace and
their leader in war. He made war according to his own discretion,
frequently against his neighbours, and sometimes against his sove-
reign. The security of a landed estate, therefore, the protection
which its owner could afford to those who dwelt on it, depended
upon its greatness. To divide it was to ruin it, and to expose
every part of it to be oppressed and swallowed up by the incur-
sions of its neighbours. The law of primogeniture, therefore,
came to take place, not immediately, indeed, but in process of time,
in the succession of landed estates, for the same reason that it has
generally taken place in that of monarchies, though not always at
their first institution. That the power, and consequently the secu-
rity of the monarchy, may not be weakened by division, it must
descend entire to one of the children. To which of them so im-
portant a preference shall be given, must be determined by some
general rule, founded not upon the doubtful distinctions of personal
merit, but upon some plain and evident difference which can admit
of no dispute. Among the children of the same family, there can
be no indisputable difference but that of sex aud that of age. The
male sex is universally preferred to the female ; and when all other
things are equal, the elder everywhere takes place of the younger.
Hence the origin of the right of primogeniture, and of what is
called lineal succession.

Laws frequently continue in force long after the circumstances,
which first gave occasion to them, and which could alone render

c c 3

388 THE NATURE AND CAUSES OF BOOK m.

them reasonable, are no more. In the present state of Europe, the
proprietor of a single acre of land is as perfectly secure of his
possession as the proprietor of a hundred thousand. The right of
primogeniture, however, still continues to be respected, and as of
all institutions it is the fittest to support the pride of family dis-
tinctions, it is still likely to endure for many centuries. In every
other respect, nothing can be more contrary to the real interests of
a numerous family than a right which, in order to enrich one,
beggars all the rest of the children.

Entails'are the natural consequences of the law of primogeniture.
They were introduced to preserve a certain lineal succession, of
which the law of primogeniture first gave the idea, and to hinder
any part of the original estate from being carried out of the pro-
posed line either by gift, or devise, or alienation ; either by the
folly or by the misfortune of any of its successive owners. They
were altogether unknown to the Romans. Neither thoir substitu-
tions nor fideicommissa boar any resemblance to entails, though
some French lawyers have thought proper to dress the modern in-
stitution in the language and garb of those ancient ones.

When great landed estates were a sort of principalities, entails
might not le unreasonable. Like what are called the fundamental
laws of some monarchies, they might frequently hinder the secu-
rity of thousands from being endangered by the caprice or extra-
vagance of one man. But in the present state of Europe, when
small as well as great estates derive their security from the laws
of their country, nothing can be more completely absurd. They
are founded upon the most absurd of all suppositions, the supposi-
tion that every successive generation of men have not an equal
right to the earth, and to all that it possesses ; but that the pro-
perty of the present generation should be restrained and regulated
according to the fancy of those who died perhaps live hundred
years ago. Entails, however, are still respected through the
greater part of Europe, in those countries particularly in which
noble birth is a necessary qualification for the enjoyment either of
civil or military honours. Entails are thought necessary for main-
taining this exclusive privilege of the nobility to the great offices
and honours of their country ; and that order having usurped one
unjust advantage over the rest of their fellow-citizens, lest their
poverty should render it ridiculous, it is thought reasonable that

CHAP. ii. THE WEALTH OF NATIONS. 389

they should have another. The common law of England, indeed,
is said to abhor perpetuities, and they are accordingly more re-
stricted there thai in any other European monarchy, though even
England is not altogether without them. In Scotland more than
one-fifth, perhaps more than one-third part of the whole lands of
the country, are at present supposed to be under strict entail.

Great tracts of uncultivated land were, in this manner, not only
engrossed by particular families, but the possibility of their being
divided again was as much as possible precluded for ever. It
seldom happens, however, that a great proprietor is a great im-
prover. In the disorderly times which gave birth to those bar-
barous institutions, the great proprietor was sufficiently employed
in defending his own territories, or in extending his jurisdiction
and authority over those of his neighbours. He had no leisure to
attend to the cultivation and improvement of land. When the
establishment of law and order afforded him this leisure, he often
wanted the inclination, and almost always the requisite abilities.
If the expense of his house and person either equalled or exceeded
his revenue, as it did very frequently, he had no stock to employ in
this manner. If he was an economist, he generally found it more
profitable to employ his annual savings in new purchases than in
the improvement of his old estate. To improve land with profit,
like all other commercial projects, requires an exact attention to
small savings and small gains, of which a man born to a great for-
tune, even though naturally frugal, is very seldom capable. The
situation of such a person naturally disposes him to attend rather
to ornament which pleases his fancy, than to profit for which he
has so little occasion. The elegance of his dress, of his equipage,
of his house and household furniture, are objects which from his
infancy he has been accustomed to have some anxiety about. The
turn of rnind which this habit naturally forms, follows him when
he comes to think of the improvement of land. He embellishes
perhaps four or five hundred acres in the neighbourhood of his
house, at ten times the expense which the land is worth after all
his improvements, and finds that if he was to improve his whole
estate in the same manner (and he has little taste for any other) he
would be a bankrupt before he had finished the tenth part of it.
There still remain in both parts of the United Kingdom some great
estates which have continued without interruption in the hands of

390 THE NATURE AND CAUSES OF BOOK in.

the same family since the times of feudal anarchy. Compare the
present condition of those estates with the possessions of the small
proprietors in their neighbourhood, and you will require no other
argument to convince you how unfavourable such extensive pro-
perty is to improvement.

If little improvement was to be expected from such great pro-
prietors, still less was to be hoped for from those who occupied the
land under them. In the ancient state of Europe, the occupiers of
land were all tenants at will. They were all or almost all slaves ;
but their slavery was of a milder kind than that known among the
ancient Greeks and Romans, or even in our West Indian colonies.
They were supposed to belong more directly to the land than to
their master. They could, therefore, be sold with it, but not sepa-
rately. They could marry, provided it was with the consent of
their master ; and he could not afterwards dissolve the marriage by
selling the man and wife to different persons. If he maimed or
murdered any of them, he was liable to some penalty, though
generally but to a small one. They were not, however, capable of
acquiring property. Whatever they acquired was acquired to their
master, and he could take it from them at pleasure. Whatever
cultivation and improvement could be carried ori by means of such
slaves, was properly carried on by their master. It was at his ex-
pense. The seed, the cattle, and the instruments of husbandry
were all his. It was for his benefit. Such slaves could acquire
nothing but their daily maintenance. It was properly the pro-
prietor himself, therefore, that, in this case, occupied his own lands,
and cultivated them by his own bondmen. This species of slavery
still subsists in Russia, Poland, Hungary, Bohemia, Moravia, and
other parts of Germany. It is only in the western and south-
western provinces of Europe that it has gradually been abolished
altogether. 1

But if great improvements are seldom to be expected from great
proprietors, they are least of all to be expected when they employ
slaves for their workmen. The experience of all ages and nations,
I believe, demonstrates that the work done by slaves, though it

1 In historical times, i. e. those illus- that suggested by the text. The facts,

trated by abundant contemporary docu- in short, did not correspond with the

ments, the predial servitude of the theory. See the Editor's Agriculture

English villain was much lighter than and Prices in England,

CHAP. ii. THE WEALTH OF NATIONS. 391

appears to cost only their maintenance, is in the end the dearest of
any. A person who can acquire no property can have no other
interest but to eat as much, and to labour as little as possible.
Whatever work he does beyond what is sufficient to purchase his
own maintenance, can be squeezed out of him by violence only, and
not by any interest of his own. 1 In ancient Italy, how much the
cultivation of corn degenerated, how unprofitable it became to the
master when it fell under the management of slaves, is remarked
by both Pliny 2 and Columella. 3 In the time of Aristotle it had
not been much better in ancient Greece. Speaking of the ideal
republic described in the laws of Plato, to maintain five thousand
idle men (the number of warriors supposed necessary for its defence)
together with their women and servants, would require, he says,
a territory of boundless extent and fertility, like the plains of
Babylon. 4

The pride of man makes him love to domineer, and nothing
mortifies him so much as to be obliged to condescend to persuade
his inferiors. Wherever the law allows it, and the nature of the
work can afford it, therefore, he will generally prefer the service of
slaves to that of free men. The planting of sugar and tobacco can
afford the expense of slave cultivation. The raising of corn, it
seems, in the present times, cannot. In the English colonies, of
which the principal produce is corn, the far greater part of the
work is done by freemen. The late resolution of the Quakers in
Pennsylvania to set at liberty all their negro slaves, may satisfy us
that their number cannot be very great. Had they made any con-
siderable part of their property, such a resolution could never have
been agreed to. In our sugar colonies, on the contrary, the whole
work is done by slaves, and in our tobacco colonies a very great
part of. The profits of a sugar plantation in any of our West
Indian colonies are generally much greater than those of any other

1 Where slavery proper subsists, any has to bear its share of the hardship ;
improvement in the process which sub- slave laboni, by the very conditions under
stitutes mechanical for human force be- which it exists, puts all the loss on the
comes difficult, partly because its intro- owner. I say nothing of the moral de-
duction would depreciate the value of gradat'on of the master and slave, or
the slave, partly because the slave is the disrepute into which slavery puts
unfitted to use it. The general preva- labour,
lence of slavery was probably the cause 2 Hist. Nat. 18. 4.
why the ancient world made so little 3 De Re Rust. i. 7.
progress in the mechanical arts. Be- * Aristot, Politic, ii. 6, 6,
sides, in times of scarcity, free labour

392 THE NATURE AND CAUSES OF BOOK in.

cultivation that is known either in Europe or America ; and the
profits of a tobacco plantation, though inferior to those of sugar,
are superior to those of corn, as has already been observed. Both
can afford the expense of slave cultivation, but sugar can afford it
still better than tobacco. The number of negroes accordingly is
much greater, in proportion to that of whites, in our sugar than in
our tobacco colonies.

To the slave cultivators of ancient times gradually succeeded a
species of farmers known at present in France by the name of
Metayer^. They are called in Latin, Coloni Partiarii. They have
been so long in disuse in England that at present I know no English
name for them. 1 The proprietor furnished them with the seed,
cattle, and instruments of husbandry the whole stock, in short,
necessary for cultivating the farm. The produce was divided equally
between the proprietor and the farmer, after setting aside what was
judged necessary for keeping up the stock, which was restored to
the proprietor when the farmer either quitted, or was turned out of
the farm.

Land occupied by such tenants is properly cultivated at the
expense of the proprietor, as much as that occupied by slaves.
There is, however, one very essential difference between them.
Such tenants, being freemen, are capable of acquiring property, and
having a certain proportion of the produce of the land, they have a
plain interest that the whole produce should be as great as possible,
in order that their own proportion may be so. A slave, on the con-
trary, who can acquire nothing but his maintenance, consults his
own ease by making the land produce as little as possible over and
above that maintenance. It is probable that it was partly upon
account of this advantage, and partly upon account of the encroach-
ments which the sovereign, always jealous of the great lords,
gradually encouraged their villains to make upon their authority,
and which seems at last to have been such as rendered this species
of servitude altogether inconvenient, that tenure in villanage
gradually wore out through the greater part of Europe. The

1 Such a form of tenure existed in place it by their own. That they did

England for about a century, beginning so was due partly to the scarcity of

at a variable date after the great plague labour, partly to the abundant seasons of

of 1348, and continuing till such time as the fifteenth century. See the Editor's

the land and stock farmers prospered Agriculture and Prices, vol. i. pp. as,

sufficiently to purchase the stock or re- 687.

CHAP. ii. THE WEALTH OF NATIONS. 393

time and manner, however, in which so important a revolution
was brought about, is one of the most obscure points in modern
history. The Church of Rome claims great merit in it ; and it
is certain that so early as the twelfth century, Alexander III
published a bull for the general emancipation of slaves. It seems,
however, to have been rather a pious exhortation than a law
to which exact obedience was required from the faithful. Slavery
continued to take place almost universally for several centuries
afterwards, till it was gradually abolished by the joint operation
of the two interests above mentioned, that of the proprietor on
the one hand, and that of the sovereign on the other. A villain
enfranchised, and at the same time allowed to continue in possession
of the land, having no stock of his own, could cultivate it only by
means of what the landlord advanced to him, and must, therefore,
have been what the French call a Metayer.

It could never, however, be the interest even of this last species
of cultivators to lay out, in the further improvement of the land,
any part of the little stoek which they might save from their own
share of the produce, because the lord, who laid out nothing, was to
get one-half of whatever it produced. The tithe, which is but
a tenth of the produce, is found to be a very great hindrance to
improvement. A tax therefore, which amounted to one-half, must
have been an effectual bar to it. It might be the interest of a
metayer to make the land produce as much as could be brought out
of it by means of the stoek furnished by the proprietor ; but it
could never be his interest to mix any part of his own with it. In
France, where five parts out of six of the whole kingdom are said to
be still occupied by this species of cultivators, the proprietors com-
plain that their metayers take every opportunity of employing the
masters' cattle rather in carriage than in cultivation ; because in
the one case they get the whole profits to themselves, in the other
they share them with their landlord. 1 This species of tenants still
subsists in some parts of Scotland. They arc called steel-bow
tenants. Those ancient English tenants, who are said by Chief

1 Opinions are divided as to the effect causes than the tenure itself, to the taille

of this kind of tenure. Travellers speak of the old regime. The me'tairie of France

favour.ibly of it now, especially in Loin- and Italy appears to be in direct succes-

bardy. Before the French Revolution, sion from the times and usages of im-

however, Arthur Young spoke disparag- perial, if not republican Home, the feudal

ingly of it. But the facts which he lords having assumed the status of the

noticed might well have sprung from other imperial fisc, or public gerarium.

394 THE NATURE AND CAUSES OF BOOK in.

Baron Gilbert l and Doctor Blackstone to have been rather bailiffs
of the landlord than farmers properly so called, were probably of the
same kind.

To this species of tenancy succeeded, though by very slow degrees,
farmers properly so called, who cultivated the land with their own
stock, paying a rent certain to the landlord. When such farmers
have a lease for a term of years, they may sometimes find it for
their interest to lay out part of their capital in the further improve-
ment of the farm ; because they may sometimes expect to recover
it, with ;i large profit, before the expiration of the lease. The
possession even of such farmers, however, was long extremely pre-
carious, and still is so in many parts of Europe. They could before
the expiration of their term be legally outed of their lease, by a new
purchaser ; in England, even by the fictitious action of a common
recovery. If they were turned out illegally by the violence of their
master, the action by which they obtained redress was extremely
imperfect. It did not always reinstate them in the possession of
the land, but gave them damages which never amounted to the real
loss. Even in England, the country perhaps of Europe where the
yeomanry has always been most respected, it was not till about the
J4th of Henry VII that the action of ejectment was invented, by
which the tenant recovers, not damages only but possession, and in
which his claim is not necessarily concluded by the uncertain deci-
sion of a single assize. This action has been found so effectual a
remedy that, in the modern practice, when the landlord has occasion
to sue for the possession of the land, he seldom makes use of the
actions which properly belong to him as landlord, the writ of right
or the writ of entry, but sues in the name of his tenant, by the writ
of ejectment. In England, therefore, the security of the tenant is
equal to that of the proprietor. In England, besides, a lease for life
of forty shillings a year value is a freehold, and entitles the lessee
to vote for a member of Parliament ; and as a great part of the
yeomanry have freeholds of this kind, the whole order becomes
respectable to their landlords on account of the political considera-
tion which this gives them. There is, I believe, nowhere in Europe,
except in England, any instance of the tenant building upon the

1 See Gilbert's Tenures, Part II, and cally, these tenures were not so precarious

Blackstone's chapter on Copyholds. It as the text implies and the law-books

seems, however, that at least in those assert,
times which are known to us histori-

CHAP. n. THE WEALTH OF NATIONS. 395

land of which he had no lease, and trusting that the honour of his
landlord would take no advantage of so important an improvement.
Those laws and customs so favourable to the yeomanry, have per-
haps contributed more to the present grandeur of England than all
their boasted regulations of commerce taken together. 1

The law which secures the longest leases against successors of
very kind is, so far as I know, peculiar to Great Britain. It was
introduced into Scotland so early as 1449, by a law of James IT.
Its beneficial influence, however, has been much obstructed by
entails ; the heirs of entail being generally restrained from letting
leases for any long term of years, frequently for more than one year.
A late Act of Parliament has, in this respect, somewhat slackened
their fetters, though they are still by much too straight. In Scotland,
besides, as no leasehold gives a vote for a member of Parliament,
the yeomanry are upon this account less respectable to their land-
lords than in England.

In other parts of Europe, after it was found convenient to secure
tenants both against heirs and purchasers, the term of their security
was still limited to a very short period ; in France, for example, to
nine years from the commencement of the lease. It has in that
country, indeed, been lately extended to twenty-seven, a period still
too short to encourage the tenant to make the most important im-
provements. The proprietors of land were anciently the legislators
of every part of Europe. The laws relating to land, therefore, were
all calculated for what they supposed the interest of the proprietor.
It was for his interest, they had imagined, that no lease granted by
any of his predecessors should hinder him from enjoying, during a
long term of years, the full value of his land. Avarice and injustice
are always short-sighted, and they did not foresee how much this
regulation must obstruct improvement, and thereby hurt in the long
run the real interest of the landlord.

The farmers too, besides paying the rent, were anciently, it was
supposed, bound to perform a great number of services to the land-
lord, which were seldom either specified in the lease, or regulated

1 These yeomen have nearly disappeared tenant's improvements by his landlord,

from England, under the operation of at least in England. But a very differ-

those strict settlements, which favour ent story comes from Ireland. In Scot*

the accumulation and prevent the par- land the tenant is effectually protected

tition of land. Public opinion has pro- by the almost universal custom of grant-

bably prevented the appropriation of a ing long farm leases.

396 THE NATURE AND CAUSES OF BOOK in.

by any precise rule, but by the use and wont of the manor or barony.
These services, therefore, being almost entirely arbitrary, subjected
the tenant to many vexations. In Scotland the abolition of all
services, not precisely stipulated in the lease, has in the course of
a few years very much altered for the better the condition of the
yeomanry of that country.

The public services to which the yeomanry were bound, were not
less arbitrary than the private ones. To make and maintain the
high roads a servitude which still subsists, I believe, everywhere,
though^with different degrees of oppression in different countries
was not the only one. When the king's troops, when his household,
or his officers of any kind passed through any part of the country,
the yeomanry were bound to provide them with horses, carriages,
and provisions, at a price regulated by the purveyor. Great Britain
is, I believe, the only monarchy in Europe where the oppression of
purveyance has been entirely abolished. It still subsists in France
and Germany.

The public taxes to which they were subject were as irregular and
oppressive as the services. The ancient lords, though extremely un-
willing to grant themselves any pecuniary aid to their sovereign,
easily allowed him to ( tallage,' as they called it, their tenants, and
had not knowledge enough to foresee how much this must in the
end affect their own revenue. The taille, as it still subsists in
France, may serve as an example of those ancient tallages. It is a
tax upon the supposed profits of the farmer, which they estimate by
the stock that he has upon the farm. It is his interest, therefore, to
appear to have as little as possible, and consequently to employ as
little as possible in its cultivation, and none in its improvement.
Should any stock happen to accumulate in the hands of a French
farmer, the taille is almost equal to a prohibition of its ever being
employed upon the land. l This tax besides is supposed to dishonour
whoever is subject to it, and to degrade him below not only the
rank of a gentleman but that of a burgher, and whoever rents the
lands of another becomes subject to it. No gentleman, nor even any
burgher who has stock, will submit to this degradation. This tax,
therefore, not only hinders the stock which accumulates upon the
land from being employed in its improvement, but drives away all
other stock from it. The ancient tenths and fifteenths, so usual in

1 See also Book V. chap. ii.

CHAP. ii. THE WEALTH OF NATIONS. 397

England in former times, seem, so far as they affected the land, to
have been taxes of the same nature with the taille. 1

UndiT all these discouragements, little improvement could be
expected from the occupiers of land. That order of people, with
all the liberty and security which law can give, must always
improve under great disadvantages. The farmer compared with
the proprietor, is as a merchant who trades with borrowed money
compared with one who trades with his own. The stock of both
may improve, but that of the one, with only equal good conduct,
must always improve more slowly than that of the other, on
account of the large share of the profits which is consumed by the
interest of the loan. The lands cultivated by the farmer must,
in the same manner, with only equal good conduct, be improved
more slowly than those cultivated by the proprietor; on account
of the large share of the produce which is consumed in the rent,
and which, had the farmer been proprietor, he might have em-
ployed in the further improvement of the land. The station of a
farmer besides is, from the nature of things, inferior to that of a
proprietor. Through the greater part of Europe the yeomanry
are regarded as an inferior rank of people, even to the better sort
of tradesmen and mechanics, and in all parts of Europe to the
great merchants and master manufacturers. It can seldom happen,
therefore, that a man of any considerable stock should quit the
superior, in order to place himself in an inferior station. Even in
the present state of Europe, therefore, little stock is likely to go
from any other profession to the improvement of land in the way
of farming. More does perhaps in Great Britain than in any other
country, though even there the great stocks which are, in some
places, employed in farming, have generally been acquired by
farming, the trade, perhaps, in which of all others stock is com-
monly acquired most slowly. After small proprietors, however,
rich and great farmers are, in every country, the principal im-
provers. There are more such perhaps in England than in any
other European monarchy. In the republican governments of
Holland and of Berne in Switzerland, the farmers are said to be
not inferior to those of England.

1 Many nccounts of early tenths and levied on all lands alike, military and

fifteenths, given in great detail, are pre- socage, free and villain. The lands of

served in the Public Kecord Office But the clergy were taxed in a different

these taxes were, unlike the French taille, way.

398 THE NATURE AND CAUSES OF BOOK in.

The ancient policy of Europe was, over and above all this, un-
favourable to the improvement and cultivation of land, whether
carried on by the proprietor or by the farmer : first, by the general
prohibition of the exportation of corn without a special licence,
which seems to have been a very universal regulation ; and secondly,
by the restraints which were laid upon the inland commerce, not
only of corn but of almost every other part of the produce of the
farm, by the absurd laws against engrossers, regrators, and fore-
stallers, and by the privileges of fairs and markets. It has already
been observed in what manner the prohibition of the exportation
of corn, together with some encouragement given to the importa-
tion of foreign corn, obstructed the cultivation of ancient Italy,
naturally the most fertile country in Europe, and at that time the
seat of the greatest empire in the world. To what degree such
restraints upon the inland commerce of this commodity, joined to
the general prohibition of exportation, must have discouraged the
cultivation of countries less fertile and less favourably circumstanced,
it is not perhaps very easy to imagine. l

CHAPTEE III.

OF THE EISE AND PROGRESS OF CITIES AND TOWNS, AFTER THE FALL

OF THE ROMAN EMPIRE.

THE inhabitants of cities and towns were, after the fall of the
Roman empire, not more favoured than those of the country.
They consisted, indeed, of a very different order of people from the
first inhabitants of the ancient republics of Greece and Italy.
These last were composed chiefly of the proprietors of lands, among

1 It is probable that Adam Smith has England at least, on the Bale of farm

overstated the degree as well as the produce. It seems that Adam Smith

effect of the ancient policy to which he had before him the system which he

refers. The legislatures of the middle alludes to in the last chapter of his Fourth

ages attempted, no doubt, to fix low Book, and which he states there was

prices by limiting the markets in which partly the policy of Colbert, partly the

sales could be carried on, and by striving relics of that independence and jealousy

to eliminate intermediaries in the corn which prevailed when France was vir-

trade. But researches into the markets tually divided into a number of inde-

and trade of the middle ages show that pendent principalities,
very little effective hindrance was put, in

CHAP. IT. THE WEALTH OF NATIONS. 399

whom the public territory was originally divided, and who found
it convenient to build their houses in the neighbourhood of one
another, and to surround them with a wall, for the sake of common
defence. After the fall of the Roman empire, on the contrary, the
proprietors of land seem generally to have lived in fortified castles
on their own estates, and in the midst of their own tenants and
dependants. The towns were chiefly inhabited by tradesmen and
mechanics, who seem in those days to have been of servile, or very
nearly of servile condition. The privileges which we find granted
by ancient charters to the inhabitants of some of the principal
towns in Europe, sufficiently show what they were before those
grants. The people to whom it is granted as a privilege, that they
might give away their own daughters in marriage without the
consent of their lord, that upon their death their own children, and
not their lord, should succeed to their goods, and that they might
dispose of their own effects by will, must, before these grants, have
been either altogether or very nearly in the same state of villanage
with the occupiers of land in the country.

They seem, indeed, to have been a very poor, mean set of people,
who used to travel about with their goods from place to place, and
from fair to fair, like the hawkers and pedlars of the present times.
In all the different countries of Europe then, in the same manner
as in several of the Tartar governments of Asia at present, taxes
used to be levied upon the persons and goods of travellers, when
they passed through certain manors, when they went over certain
bridges, when they carried about their goods from place to place
in a fair, when they erected in it a booth or stall to sell them in. l
These different taxes were known in England by the names of
passage, pontage, lastage, and stallage. Sometimes the king,
sometimes a great lord, who had, it seems, upon some occasions,
authority to do this, would grant to particular traders, to such
particularly as lived in their own demesnes, a general exemption
from such taxes. Such traders, though in other respects of servile,
or very nearly of servile condition, were upon this account called
Free-traders. They in return usually paid to their protector a sort

1 For a description of the tolls levied extortions was the stimulant to the dis-

by an Eastern potentate, see Sanuto's covery of the Cape passage, and the

account of the trade from Aden, in his success of the attempt the cause of the

Letter to Pope John XXI, in the Gesta great prosperity achieved by the Portu-

Dei per Francos. The avoidance of these guese in their trade with the East.

400 THE NATURE AND CAUSES OF BOOK in.

of annual poll-tax. In those days, protection was seldom granted
without a valuable consideration, and this tax might, perhaps, be
considered as compensation for what their patrons might lose by
their exemption from other taxes. At first, both those poll-taxes
and those exemptions seem to have been altogether personal, and
to have affected only particular individuals, during either their
lives, or the pleasure of their protectors. In the very imperfect
accounts which have been published from Domesday-book^ of
several o the towns of England, mention is frequently made,
sometimes of the tax which particular burghers paid, each of them,
either to the king, or to some other great lord, for this sort of
protection, and sometimes of the general amount only of all those
taxes.*

But how servile soever may have been originally the condition
of the inhabitants of the towns, it appears evidently that they
arrived at liberty and independency much earlier than the occupiers
of land in the country. That part of the king's revenue which
arose from such poll-taxes in any particular town, used commonly
to be let in farm, during a term of years for a certain rent, some-
times to the sheriff of the county, and sometimes to other persons.
The burghers themselves frequently got credit enough to be
admitted to farm the revenues of this sort which arose out of their
own town, they becoming jointly and severally answerable for the
whole rent.f To let a farm in this manner was quite agreeable
to the usual economy of, I believe, the sovereigns of all the different
countries of Europe, who used frequently to let whole manors to
all the tenants of those manors, they becoming jointly and severally
answerable for the whole rent, but in return being allowed to
collect it in their own way, and to pay it into the king's exchequer
by the hands of their own bailiff, and being thus altogether freed
from the insolence of the king's officers ; a circumstance in those
dayfe regarded as of the greatest importance,

At first, the farm of the town was probably let to the burghers,
in the same manner as it had been to other farmers, for a term of
years only. In process of time, however, it seems to have become
the general practice to grant it to them in fee, that is, for ever,

* See Brady's Historical Treatise of History of the Exchequer, chap. 10.
Cities and Boroughs, p. 3, &c. sect. v. p, 223, first edition,

t See Madox,FirmaBurgi, p. 18; also

CHAP. m. THE WEALTH OF NATIONS. 401

reserving a rent certain never afterwards to be augmented. The
payment having thus become perpetual, the exemptions, in return
for which it was made, naturally became perpetual too. Those
exemptions, therefore, ceased to be personal, and could not afterwards
be considered as belonging to individuals as individuals, but as
burghers of a particular burgh, which, upon this account, was
called a Free burgh, for the same reason that they had been called
Free-burghers or Free-traders.

Along with this grant, the important privileges above mentioned,
that they might give away their own daughters in marriage, that
their children should succeed to them, and that they might dispose
of their own effects by will, were generally bestowed upon the
burghers of the town to whom it was given. \Yhether such privi-
leges had before been usually granted along with the freedom of
trade to particular burghers, as individuals, I know not. I reckon
it not improbable that they were, though I cannot produce any
direct evidence of it. But, however this may have been, the prin-
cipal attributes of villanage and slavery being thus taken away from
them, they now, at least, became really free in our present sense of
the word Freedom. 1

Nor was this all. They w r ere generally at the same time erected
into a commonalty or corporation, with the privilege of having
magistrates and a town-council of their own, of making bye-laws
for their own government, of building walls for their own defence,
and of reducing all their inhabitants under a sort of military
discipline, by obliging them to watch and ward, that is, as anciently
understood, to guard and defend those walls against all attacks and
surprises by night as well as by day. In England they were
generally exempted from siiit to the hundred and county courts;
and all such pleas as should arise among them, the pleas of the
Crown exeepted, were left to the decision of their own magistrates.
In other countries much greater and more extensive jurisdictions
were frequently granted to them.*

1 The latest instances which have come History of Agriculture and Prices, vol. ii.

under my notice of permission granted p. 616.

to a tenant to contract a marriage for * Sue Madox, Firma Burgi : see also

his daughter, or to send his son to the Pfeffel in the remarkable events under

Schools with a view to his entering into Frederick II, and his successors of the

Holy Orders, are of the close of the I4th house of Snabia.
century. They may be found in my

VOL I. D d

402 THE NATURE AND CA USES OF BOOK in.

[t might, probably, be necessary to grant to such towns as were
admitted to farm their own revenues, some sort of compulsive
jurisdiction to oblige their own citizens to make payment. In
those disorderly times it might have been extremely inconvenient
to have left them to seek this sort of justice from any other tribunal.
But it must seem extraordinary that the sovereigns of all the
different countries of Europe should have exchanged in this manner
for a rent certain, never more to be augmented, that branch of their
revenue which was, perhaps, of all others the most likely to be
improved by the natural course of things, without either expense
or attention of their own ; and that they should, besides, have in
this manner voluntarily erected a sort of independent republics in
the heart of their own dominions.

In order to understand this, it must be remembered, that in those
days the sovereign of perhaps no country in Europe was able
to protect, through the whole extent of his dominions, the weaker
part of his subjects from the oppression of the great lords. Those
whom the law could not protect, and who were not strong enough
to defend themselves, were obliged either to have recourse to the
protection of some great lord, and in order to obtain it to become
either his slaves or vassals, or to enter into a league of mutual
defence for the common protection of one another. The inhabitants
of cities and burghs, considered as single individuals, had no power
to defend themselves ; but by entering into a league of mutual
defence with their neighbours, they were capable of making no
contemptible resistance. The lords despised the burghers, whom
they considered not only as of a different order, but as a parcel
of emancipated slaves, almost of a different species from themselves.
The wealth of the burghers never failed to provoke their envy
and indignation, and they plundered them upon every occasion
without mercy or remorse. The burghers naturally hated and
feared the lords. The king hated and feared them too ; but though
perhaps he might despise, he had no reason either to hate or fear
the burghers. Mutual interest, therefore, disposed them to support
the king, and the king to support them against the lords. They
were the enemies of his enemies, and it was his interest to render
them as secure and independent of those enemies as he could. By
granting them magistrates of their own, the privilege of making
bye-laws for their own government, that of building walls for their

CHAP. in. THE WEALTH OF NATIONS. 403

own defence, and that of reducing all their inhabitants under a sort
of military discipline, he gave them all the means of security and
independency of the barons which it was in his power to bestow.
Without the establishment of some regular government of this kind,
without some authority to compel their inhabitants to act according
to some certain plan or system, no voluntary league of mutual
defence could cither have afforded them any permanent security,
or have enabled them to give the king any considerable support.
By granting them the farm of their town in fee, he took away from
those whom he wished to have for his friends, and, if one may say
so, for his allies, all ground of jealousy and suspicion that he was
ever afterwards to oppress them, either by raising the farm-rent
of their town, or by granting it to some other farmer.

The princes Who lived upon the worst terms with their barons,
seem accordingly to have been the most liberal in grants of this
kind to their burghs. King John of England, for example, appears
to have been a most munificent benefactor to his towns,"* Philip
the First of France lost all authority over his barons. Towards the
end of his reign, his son Lewis, known afterwards by the name
of Lewis the Fat, consulted, according to Father Daniel, with
the bishops of the royal demesnes, concerning the most proper
means of restraining the violence of the great lords. Their advice
consisted of two different proposals. One was to erect a new order
of jurisdiction, by establishing magistrates and a town council
in every considerable town of his demesnes ; the other was to form
a new militia, by making the inhabitants of those towns, under the
command of their own magistrates, march out upon proper occasions
to the assistance of the king. It is from this period, according
to the French antiquarians, that we are to date the institution
of the magistrates and councils of cities in France. It was during
the unprosperous reigns of the princes of the house of Suabia
that the greater part of the free towns of Germany received the first
grants of their privileges, and that the famous Hanseatic League
first became formidable.t l

The militia of the cities seems, in those times, not to have been

* See Madox. tique ; Schlozer's Verfall und Untergang

t See Pfeffel, Abrrfgd de THistoire et des Kansas, &c. ; Lappenberg's Uvknnd-

du Droit Public en Allemagne. liche Geschichte des Hansischen Stahl-

1 For the history of the Hanseatic hofes zu London.

League see Mallet, La Ligue Hansea-

D d 2

404 THE NATURE AND CAUSES OF BOOK in.

inferior to that of the country, and as they could be more readily
assembled upon any sudden occasion, they frequently had the
advantage in their disputes with the neighbouring lords. In
countries such as Italy and Switzerland, in which, on account
either of their distance from the principal seat of government,
of the natural strength of the country itself, or of some other reason,
the sovereign came to lose the whole of his authority, the cities
generally became independent republics, and conquered all the
nobility in their neighbourhood, obliging them to pull down their
castles in the country, and to live, like other peaceable inhabitants,
in the city. This is the short history of the republic of Berne, as
well as of several other cities of Switzerland. If you except Venice,
for of that city the history is somewhat different, it is the history
of all the considerable Italian republics, of which so great a number
arose and perished, between the end of the twelfth and the begin-
ning of the sixteenth century.

In countries such as France or England, where the authority
of the sovereign, though frequently very low, never was destroyed
altogether, the cities had no opportunity of becoming entirely
independent. They became, however, so considerable that the
sovereign could impose no tax upon them, besides the stated farm-
rent of the town, without their own consent. They were, therefore,
called upon to send deputies to the general assembly of the states
of the kingdom, where they might join with the clergy and the
barons in granting, upon urgent occasions, some extraordinary aid
to the king. Being generally, too, more favourable to his power,
their deputies seem, sometimes, to have been employed by him as
a counterbalance in those assemblies to the authority of the great
lords. Hence the origin of the representation of burghs in the
states general of all the great monarchies in Europe.

Order and good government, and along with- them the liberty
and security of individuals, were, in this manner, established in
cities at a time when the occupiers of land in the country were
exposed to every sort of violence. But men in this defenceless
state naturally content themselves with their necessary subsistence ;
because to acquire more might only tempt the injustice of their
oppressors. On the contrary, when they are secure of enjoying the
fruits of their industry, they naturally exert it to better their
condition, and to acquire not only the necessaries but the con-

CHAP. in. THE WEALTH OF NATIONS. 405

veniences and elegancies of life. That industry, therefore, which
aims at something more than necessary subsistence, was established
in cities long before it was commonly practised by the occupiers of
land in the country. If in the hands of a poor cultivator, oppressed
with the servitude of villanage, some little stock should accumulate,
he would naturally conceal it with great care from his master,
to whom it would otherwise have belonged, and take the first oppor-
tunity of running away to a town. The law was at that time
so indulgent to the inhabitants of towns, and so desirous of dimi-
nishing the authority of the lords over those of the country, that if
he could conceal himself there from the pursuit of his lord for a
year, he was free for ever. Whatever stock, therefore, accumulated
in the hands of the industrious part of the inhabitants of the
country, naturally took refuge in cities, as the only sanctuaries
in which it could be secure to the person that acquired it. 1

The inhabitants of a city, it is true, must always ultimately derive
their subsistence and the whole materials and means of their industry
from the country. But those of a city, situated near either the sea-
coast or the banks of a navigable river, arc not necessarily confined
to derive them from the country in their neighbourhood. They
have a much wider range, and may draw them from the most remote
corners of the world, either in exchange for the manufactured pro-
duce of their own industry, or by performing the office of carriers
between distant countries, and exchanging the produce of one for
that of another. A city might in this manner grow up to great
wealth and splendour, while not only the country in its neighbour-
hood, but all those to which it traded, were in poverty and wretched-
ness. Each of those countries, perhaps, taken singly, could afford
it but a small part, either of its subsistence, or of its employment;
but all of them taken together could afford it both a great sub-
sistence and a great employment. There were, however, within the
narrow circle of the commerce of those times, some countries that
were opulent and industrious. Such was the Greek empire as
long as it subsisted, and that of the Saracens during the reigns
of the Abassides. Such too was Egypt till it was conquered
by the Turks, some part of the coast of Barbary, and all those

1 This statement, as far as England is places were, for the times, well to do,

concerned, is exaggerated. An inspection and protected in the enjoyment of their

of a single taxing roll of Edward I's reign property,
will show that the inhabitants of country

406 THE NATURE AND CAUSES OF BOOK m.

provinces of Spain which were under the government of the
Moors.

The cities of Italy seem to have been the first in Europe which
were raised by commerce to any considerable degree of opulence.
Italy lay in the centre of what was at that time the improved and
civilized part of the world. The crusades too, though by the great
waste of stock and destruction of inhabitants which they occa-
sioned, they must necessarily have retarded the progress of the
greater part of Europe, were extremely favourable to that of some
Italian cities. The great armies which marched from all parts to
the conquest of the Holy Land, gave extraordinary encouragement
to the shipping of Venice, Genoa, and Pisa, sometimes in trans-
porting them thither, and always in supplying them with pro-
visions. They were the commissaries, if one may say so, of other
armies ; and the most destructive frenzy that ever befell the Euro-
pean nations was a source of opulence to those republics.

The inhabitants of trading cities, by importing the improved
manufactures and expensive luxuries of richer countries, afforded
some food to the vanity of the great proprietors, who eagerly
purchased them with great quantities of the rude produce of their
own lands. The commerce of a great part of Europe in those times,
accordingly, consisted chiefly in the exchange of their own rude for
the manufactured produce of more civilized nations. Thus the wool
of England used to be exchanged for the wines of France and
the fine cloths of Flanders, in the same manner as the corn of
Poland is at this day exchanged for the wines and brandies of
France, and for the silks and velvets of France and Italy.

A taste for the finer and more improved manufactures was in
this manner introduced by foreign commerce into countries where
no such works were carried on. But when this taste became so
general as to occasion a considerable demand, the merchants, in
order to save the expense of carriage, naturally endeavoured to
establish some manufactures of the same kind in their own country.
Hence the origin of the first manufactures for distant sale that
seem to have been established in the western provinces of Europe,
after the fall of the Koman empire.

No large country, it must be observed, ever did or could subsist
without some sort of manufactures being carried on in it ; and
when it is said of any such country that it has no manufactures,

CHAP. in. THE WEALTH OF NATIONS. 407

it must always be understood of the finer and more improved, or of
such as are fit for distant sale. In every large country, both the
clothing and household furniture of the far greater part of the
people are the produce of their own industry. This is even more
universally the case in those poor countries which are commonly
said to have no manufactures than in those rich ones that are said
to abound in them. In the latter, you will generally find, both
in the clothes and household furniture of the lowest rank of people,
a much greater proportion of foreign productions than in the
former.

Those manufactures which are fit for distant sale, seem to have
been introduced into different countries in two different ways.

Sometimes they have been introduced, in the manner above
mentioned, by the violent operation, if one may say so, of the stocks
of particular merchants and undertakers, who established them in
imitation of some foreign manufactures of the same kind. Such
manufactures, therefore, are the offspring of foreign commerce, and
such seem to have been the ancient manufactures of silks, velvets,
and brocades, which flourished in Lucca during the thirteenth
century. They were banished from thence by the tyranny of one
of Machiavel's heroes, Castruccio Castracani. In 1310, nine
hundred families were driven out of Lucca, of whom thirty-one
retired to Venice, and offered to introduce there the silk manufac-
ture,* Their offer was accepted ; many privileges were conferred
upon them, and they began the manufacture with three hundred
workmen. Such too seem to have been the manufactures of fine
cloths that anciently flourished in Flanders, and which were intro-
duced into England in the beginning of the reign of Elizabeth ;
and such are the present silk manufactures of Lyons and Spitalfields.
Manufactures introduced in this manner are generally employed
upon foreign materials, being imitations of foreign manufactures*
When the Venetian manufacture was first established, the materials
were all brought from Sicily and the Levant. The more ancient
manufacture of Lucca was likewise carried on with foreign materials*
The cultivation of mulberry-trees, and the breeding of silk-worms,
' seem not to have been common in the northern parts of Italy before
the sixteenth century. Those arts were not introduced into France
till the reign of Charles IX. The manufactures of Flanders were
* See Sandi, Istoria Civile de Vinezia, Part II. vol. i. p;^. 247, 256.

308 THE NATURE AND CAUSES OF . BOOK m.

carried on chiefly with Spanish and English wool. Spanish wool
was the material, not of the first woollen manufacture of England,
hut of the first that was fit for distant sale. 1 More than one-half
the materinls of the Lyons manufacture is at this day foreign silk ;
when it was first established, the whole or very nearly the whole
was so. No part of the materials of the Spitalfields manufacture
is ever likely to be the produce of England. The seat of such
manufactures, as they are generally introduced by the scheme and
project of a few individuals, is sometimes established in a maritime
city, and sometimes in an inland town, according as their interest,
judgment, or caprice happened to determine.

At other times, manufactures for distant sale grow up naturally,
and as it were of their own accord, by the gradual refinement of
those household and coarser manufactures which must at all times
be carried on even in the poorest and rudest countries. Such manu-
factures are generally employed upon the materials which the
country produces, and they seem frequently to have been first
refined and improved in such inland countries as were, not indeed
at a very great, but at a considerable distance from the sea coast,
and sometimes even from all water carriage. An inland country
raturally fertile and easily cultivated, produces a great surplus of
provisions beyond what is necessary for maintaining the cultivators,
and on account of the expense of land carriage, and inconvenienoy
of river navigation, it may frequently be difficult to send this surplus
abroad. Abundance, therefore, renders provisions cheap, and en-
courages a great number of workmen to settle in the neighbour-
hood, who find that their industry can there procure them more of
the necessaries and conveniencies of life than in other places. They
work up the materials of manufacture which the land produces, a ; nd
exchange their finished work, or, what is the same thing, the price
of it, for more materials and provisions. They give a new value to
the surplus part of the rude produce, by saving the expense of
carrying it to the water side, or to some distant market ; and they
furnish the cultivators with something in exchange for it that is

1 It is said that the origin of Spanish the same historian). But English wool

wool was a flock of English sheep ex- seems for a long time to have been

ported to Spain at or about the year superior to Spanish. The Saxony wool,

1 348. (Macpherson, quoted by Hallam.) which finally superseded Spanish, waa

A flock of sheep was also exported to originally derived from Spain.
Spain in 1465 (Bymer,xi. 534, quoted by

CHAP. in. THE WEALTH OF NATIONS. 409

either useful or agreeable to them, upon easier terms than they
could have obtained it before. The cultivators get a better price
for their surplus produce, nnd can purchase cheaper other con-
veniences which they have occasion for. They are thus both
encouraged and enabled to increase this surplus produce by a further
improvement and better cultivation of the land; and as the fertility
of the land had given birth to the manufacture, so the progress of
the manufacture re-acts upon the land, and increases still further its
fertility. The manufacturers first supply the neighbourhood, and
afterwards, as their work improves and refines, more distant markets.
For though neither the rude produce, nor even the coarse manufac-
ture, could, without the greatest difficulty, support the expense of
a considerable land carriage, the refined and improved manufacture
easily may. In a small bulk it frequently contains the price of a
great quantity of rude produce. A piece of fine cloth, for example,
which weighs only eighty pounds, contains in it the price not only
of eighty pounds weight of wool, but sometimes of several thousand
weight of corn, the maintenance of the different working people
and of their immediate employers. The corn, which could with
difficulty have been carried abroad in its own shape, is in this
manner virtually exported in that of the complete manufacture, and
may easily be sent to the remotest corners of the world. In this
manner have grown up naturally, and as it were of their own accord,
the manufactures of Leeds, Halifax, Sheffield, Birmingham, and
Wolverhampton. Such manufactures are the offspring of agricul-
ture. In the modern history of Europe, their extension and im-
provement have generally been posterior to those which were the
offspring of foreign commerce. England was noted for the manu-
facture of fine cloths made of Spanish wool, more than a century
before any of those which now flourish in the places above men-
tioned were fit for foreign sale. The extension and improvement of
these last could not take place but in consequence of the extension
and improvement of agriculture, the last and greatest effect of
foreign commerce, and of the manufactures immediately introduced
by it, and which I shall now proceed to explain.

410 THE NATURE AND CAUSES OF BOOK nr.

CHAPTER IV.

HOW THE COMMERCE OF THE TOWNS CONTRIBUTED TO THE IMPROVE-
MENT OF THE COUNTRY.

THE increase and riches of commercial and manufacturing towns
contributed to the improvement and cultivation of the
countries to which they belonged, in three different ways.

First, by affording a great and ready market for the rude produce
of the country, they gave encouragement to its cultivation and
further improvement. This benefit was not even confined to the
countries in which they were situated, but extended more or less to
all those with which they had any dealings. To all of them they
afforded a market for some part either of their rude or manufactured
produce, and consequently gave some encouragement to the industry
and improvement of all. Their own country, however, on account
of its neighbourhood, necessarily derived the greatest benefit from
this market. Its rude produce being charged with less carriage,
the traders could pay the growers a better price for it, and yet afford
it as cheap to the consumers as that of more distant countries.

Secondly, The wealth acquired by the inhabitants of cities was
frequently employed in purchasing such lands as were to be sold, of
which a great part would frequently be uncultivated. Merchants
are commonly ambitious of becoming country gentlemen, and when
they do, they are generally the best of all improvers. A merchant
is accustomed to employ his money chiefly in profitable projects ;
whereas a mere country gentleman is accustomed to employ it
chiefly in expense. The one often sees his money go from him and
return to him again with a profit; the other, when once he parts
with it, very seldom expects to see any more of it. Those different
habits naturally affect their temper and disposition in every sort of
business. A merchant is commonly a bold, a country gentleman a
timid undertaker. The one is not afraid to lay out at once a large
capital upon the improvement of his land, when he has a probable
prospect of raising the value of it in proportion to the expense ; the
other, if he has any capital, which is not always the case, seldom
ventures to employ it in this manner. If he improves at all, it is
commonly not with a capital, but with what he can save out of his

CHAP, iv, THE WEALTH OF NATIONS. 411

annual revenue. Whoever has had the fortune to live in a mercan-
tile town situated in an unimproved country, must have frequently
observed how much more spirited the operations of merchants were
in this way than those of mere country gentlemen. The habits,
besides, of order, economy, and attention, to which mercantile busi-
ness naturally forms a merchant, render him much fitter to execute,
with profit and success, any project of improvement.

Thirdly, and lastly, Commerce and manufactures gradually intro-
duced order and good government, and with them the liberty and
security of individuals, among the inhabitants of the country, who
had before lived almost in a continual state of war with their neigh-
bours, and of servile dependency upon their superiors. This, though
it has been the least observed, is by far the most important of all
their effects. Mr. Hume l is the only writer who, so far as I know,
has hitherto taken notice of it.

In a country which has neither foreign commerce, nor any of the
finer manufactures, a great proprietor, having nothing for which
he can exchange the greater part of the produce of his lands which
is over and above the maintenance of the cultivators, consumes the
whole in rustic hospitality at home. If this surplus produce is
sufficient to maintain a hundred or a thousand men, he can make
use of it in no other way than by maintaining a hundred or a thou-
sand men. He is at all times, therefore, surrounded with a multi-
tude of retainers and dependants, who having no equivalent to give
in return for their maintenance, but being fed entirely by his
bounty, must obey him, for the^same reason that soldiers must obey
the prince who pays them. Before the extension of commerce and
manufactures in Europe, the hospitality of the rich and the great,
from the sovereign down to the smallest baron, exceeded everything
which in the present times we can easily form a notion of. West-
minster Hall was the dining-room of William Bufus, and might
frequently, "perhaps, not be too large for his company. It was
reckoned a piece of magnificence in Thomas Becket, that he strewed
the floor of his hall with clean hay or rushes in the season, in order
that the knights and squires, who could not get seats, might not
spoil their fine clothes when they sat down on the floor to eat their
dinner. The great Earl of Warwick is said to have entertained
every day at his different manors, thirty thousand people ; and

1 Discourse of Commerce,

412 THE NATURE AND CAUSES OF BOOK in.

though the number here may have been exaggerated, it must, how-
ever, have been very great to admit of such exaggeration. A hospi-
tality nearly of the same kind was exercised not many years ago in
many different parts of the Highlands of Scotland. It seems to Le
common in all nations to whom commerce and manufactures are
little known. I have seen, says Dr. Pocock/ an Arab chief dine in
the streets of a town where he had come to sell his cattle, and invite
all passengers, even common beggars, to sit down with him and
partake of his banquet.

The occupiers of land were in every respect as dependent upon the
groat proprietor as his retainers. Even such of them as were not in
a state of villanage were tenants at will, who paid a rent in no
respect equivalent to the subsistence which the land afforded them.
A crown, half a crown, a sheep, a lamb, was some years ago in the
Highlands of Scotland a common rent for lands wliieR maintained
a family. In some places it is so at this day; nor will money at
present purchase a greater quantity of commodities there than in
other places. In a country where the surplus produce of a large
estate must be consumed upon the estate itself, it will frequently be
more convenient for the proprietor that part of it be consumed at a
distance from his own house, provided they who consume it are as
dependent upon him as either his retainers or his menial servants.
He is thereby saved from the embarrassment of either too large a
company or too large a family. A tenant at will, who possesses
land sufficient to maintain his family for little more than a quit-
rent, is as dependent upon the proprietor as any servant or retainer
whatever, and must obey him with as little reserve. Such a pro-
prietor, as he feeds his servants and retainers at his own house, so
he feeds his tenants at their. houses. The subsistence of both is
derived from his bounty, and its continuance depends upon his good
pleasure.

Upon the authority which the great proprietors necessarily had
in such a state of things over their tenants and retainers, was
founded the power of the ancient barons. They necessarily became
the judges in peace, and the leaders in war, of all who dwelt upon
their estates. They could maintain oixler and execute the law
within their respective demesnes, because each of them could there
turn the whole force of all the inhabitants against the injustice of

1 Description of the East, i. 183.

CHAP. iv. THE WEALTH OF NATIONS. 413

any one. No other person had sufficient authority to do this. The
king in particular had not. In those ancient times he was little
more than the greatest proprietor in his dominions, to whom, for
the sake of common defence against their common enemies, the
other great proprietors paid certain respects. To have enforced
payment of n small debt within the lands of a great proprietor,
where all the inhabitants were armed and accustomed to stand by
one another, would have cost the king, had he attempted it by his
own authority, almost the same effort as to extinguish a civil war.
He was, therefore, obliged to abandon the administration of justice
through the greater part of the country, to those who were capable
of administering it ; and for the same reason to leave the command
of the country militia to those whom that militia would obey. 1

It is a mistake to imagine that those territorial jurisdictions took
their origin from the feudal law. Not only the highest jurisdictions
both civil and criminal, but the power of levying troops, of coining
money, and even that of making bye-laws for the government of
their own people, were all rights possessed allodially by the groat
proprietors of land several centuries before even the name of the
feudal law was known in Europe. The authority and jurisdiction
of the Saxon lords in England appear to have been as great before
the Conquest as that of any of the Norman lords after it. But the
feudal law is not supposed to have become the common law of Eng-
land till after the conquest. That the most extensive authority and
jurisdictions were possessed by the great lords in France allodially,
long before the feudal law was introduced into that country, is a
matter of fact that admits of no doubt. That authority and those
jurisdictions all necessarily flowed from the state of property and
manners just now described. Without remounting to the remote
antiquities of either the French or English monarchies, we may find
in much later times many proofs that such effects must always flow
from such causes. It is not thirty years ago since Mr. Cameron of
Lochiel, a gentleman of Lochabar in Scotland, without any legal
warrant whatever, not being what was then called a lord of regality,
nor even a tenant in chief, but a vassal of the Duke of Argyle, and
without being so much as a justice of peace, used, notwithstanding,

^ For the leading features of manorial For the same jurisdiction in Scotland
jurisdiction in England, see the Editor's at a later age, see Captain Dunbar's
Agriculture and Prices, vol. i. chap. 6. Excerpta.

414 THE NATURE AND CAUSES OF BOOK m.

to exercise the highest criminal jurisdiction over his own people.
He is said to have done so with great equity, though without any
of the formalities of justice ; and it is not improbable that the state
of that part of the country at that time made it necessary for him
to assume this authority in order to maintain the public peace.
That gentleman, whose rent never exceeded five hundred pounds a
year, carried, in 1745, eight hundred of his own people into the re-
bellion with him.

The introduction of the feudal law, so far from extending, may
be regarded as an attempt to moderate the authority of the great
allodial lords. It established a regular subordination, accompanied
with a long train of services and duties, from the king down to the
smallest proprietor. During the minority of the proprietor, the
rent, together with the management of his lands, fell into the hands
of his immediate superior, and, consequently, those of all great pro-
prietors into the hands of the king, who was charged with the
maintenance and education of the pupil, and who, from his au-
thority as guardian, was supposed to have a right of disposing of
him in marriage, provided it was in a manner not unsuitable
to his rank. But though this institution necessarily tended to
strengthen the authority of the king and to weaken that of the
great proprietors, it could not do either sufficiently for establishing
order and good government among the inhabitants of the country;
because it could not alter sufficiently that state of property and
manners from which the disorders arose. The authority of govern-
ment still continued to be, as before, too weak in the head and too
strong in the inferior members, and the excessive strength of the
inferior members was the cause of the weakness of the head. After
the institution of feudal subordination, the king was as incapable of
restraining the violence of the great lords as before. They still
continued to make war according to their own discretion, almost
continually upon one another, and very frequently upon the king ;
arid the open country still continued to be a scene of violence,
rapine, and disorder.

But what all the violence of the feudal institutions could never
have effected, the silent and insensible operation of foreign com-
merce and manufactures gradually brought about. These gradually
furnished the great proprietors with something for which they could
exchange the whole surplus produce of their lands, and which they

CHAP. iv. THE WEALTH OF NATIONS. 415

could consume themselves without sharing it either with tenants or
retainers. c All for ourselves, and nothing for other people/ seems,
in every age of the world, to have been the vile maxim of the
masters of mankind. 1 As soon, therefore, as they could find a
method of consuming the whole value of their rents themselves,
they had no disposition to share them with any other persons. For
a pair of diamond buckles, perhaps, or for something as frivolous and
useless, they exchanged the maintenance, or what is the same thing,
the price of the maintenance of a thousand men for a year, and with
it the whole weight and authority which it could give them. The
buckles, however, were to be all their own, and no other human
creature was to have any share of them ; whereas in the more
ancient method of expense they must have shared with at least a
thousand people. With the judges that were to determine the pre-
ference, this difference was perfectly decisive ; and thus, for the
gratification of the most childish, the meanest, and the most sordid
of all vanities, they gradually bartered their whole power and
authority.

In a country where there is no foreign commerce, nor any of the
finer manufactures, a man of ten thousand a year cannot well em-
ploy his revenue in any other way than in maintaining, perhaps, a
thousand families, who are all of them necessarily at his command.
In the present state of Europe, a man of ten thousand a year can
spend his whole revenue, and he generally does so, without directly
maintaining twenty people, or being able to command more than
ten footmen not worth the commanding. Indirectly, perhaps, he
maintains as great or even a greater number of people than he
could have done by the ancient method of expense. For though
the quantity of precious productions for which he exchanges his
whole revenue be very small, the number of workmen employed in
collecting and preparing it must necessarily have been very great.
Its great price generally arises from the wages of their labour, and
the profits of all their immediate employers. By paying that

1 The rapine which the feudal lords the general public as a compensation to
carried on by sheer violence in early the crown, the exemption of landed
times, has been effected as surely and estates from legacy duties, and the en-
more safely in later days, under the closure of commons, which was earned
forms of law and the machinery of legis- on by private bills from the time of Anne
lation. Such, for example, were the till 1845, and now by a formal process,
emancipation of the estates held under based on the principles which characterised
military tenure, by imposing an excise on such private bills.

416 THE NATURE AND CAUSES OF BOOK in.

price, he indirectly pays all those wages and profits, and thus indi-
rectly contributes to the maintenance of all the workmen and their
employers. He generally contributes, however, but a very small
proportion to that of each, to very few perhaps a tenth, to many
not a hundredth, and to some not a thousandth, nor even a ten
thousandth part of their whole annual maintenance. Though he
contributes, therefore, to the maintenance of them all, they are all
more or less independent of him, because generally they can all be
maintained without him.

When the great proprietors of land spend their rents in main-
taining their tenants and retainers, each of them maintains entirely
all his own tenants and all his own retainers. But when they spend
them in maintaining tradesmen and artificers, they may, all of them
taken together, perhaps, maintain as great, or, on account of the
waste which attends rustic hospitality, a greater number of people
than before. Each of them, however, taken singly, contributes
often bat a very small share to the maintenance of any individual
of this greater number. Each tradesman or artificer derives his
subsistence from the employment, not of one, but of a hundred or
a thousand different customers. Though in eome measure obliged
to them all, therefore, he is not absolutely dependent upon any one
of them.

The personal expense of the great proprietors having in this
manner gradually increased, it was impossible that the number of
their retainers should not as gradually diminish, till they were at
last dismissed altogether. The same cause gradually led them to
dismiss the unnecessary part of their tenants. Farms were en-
larged, and the occupiers of land, notwithstanding the complaints of
depopulation, reduced to the number necessary for cultivating it,
according to the imperfect state of cultivation and improvement in
those times. Bj r the removal of the unnecessary mouths, and by
exacting from the farmer the full value of the farm, a great surplus,
or what is the same thing, the price of a great surplus, was ob-
tained for the proprietor, which the merchants and manufacturers
soon furnished him with a method of spending upon his own person
in the same manner as he had done the rest. The same cause con-
tinuing to operate, he was desirous to raise his rents above what his
lands, in the actual state of their improvement, could afford. His
tenants could agree to this upon one condition only, that they should

CHAP. iv. THE WEALTH OF NATIONS. 417

be secured in their possession for such a term of years as might give
them time to recover with profit whatever they should lay out in
the further improvement of the land. The expensive vanity of the
landlord made him willing to accept of this condition ; and hence
the origin of long leases.

Even a tenant at will, who pays the full value of the land, is not
altogether dependent upon the landlord. The pecuniary advantages
which they receive from one another are mutual and equal, and
such a tenant will expose neither his life nor his fortune in the
service of the proprietor* But if he has a lease for a long term of
years, he is altogether independent ; and his landlord must not
expect from him even the most trifling service beyond wfyat is
either expressly stipulated in the lease, or imposed upon him by the
common and known law of the country.

The tenants having in this manner become independent, and the
retainers being dismissed, the great proprietors were no longer
capable of interrupting the regular execution of justice, or of dis-
turbing the peace of the -country. Having sold their birthright,
not like Esau, for a mess of pottage in time of hunger and neces-
sity, but in the wantonness of plenty, for trinkets and baubles, fitter
to be the playthings of children than the pursuits of men, they
became as insignificant as any substantial burgher or tradesman in
a city. A regular government was established in the country as
well as in the city, nobody having sufficient power to disturb its
operations in the one any more than in the other.

It does not, perhaps, relate to the present subject, but I cannot
help remarking it, that very old families, such as have possessed
some considerable estate from father to son for many successive
generations, are very rare in commercial countries. In countries
which have little commerce, on the contrary, such as Wales or the
Highlands of Scotland, they are very common. The Arabian
histories seem to be all full of genealogies, and there is a history-
written by a Tartar Khan, which has been translated into several
European languages, and which contains scarce anything else; a
proof that ancient families are very common among those nations.
In countries where a rich man can spend his revenue in no other
way than by maintaining as many people as it can maintain, he is
not apt to run out, and his benevolence, it seems, is seldom so violent
as to attempt to maintain more than he can afford. But where be

VOL. I. EC

418 THE NATURE AND CAUSES OF BOOK nr.

can spend the greatest revenue upon his own person, he frequently
has no bounds to his expense, because he frequently has no bounds
to his vanity, or to his affection for his own person. In commercial
countries, therefore, riches, in spite of the most violent regulations
of law to prevent their dissipation, very seldom remain long in the
same family. Among simple nations, on the contrary, they fre-
quently do without any regulations of law ; for among nations of
shepherds, such as the Tartars and Arabs, the consumable nature of
their property necessarily renders all such regulations impossible.

A revolution of the greatest importance to the public happiness
was in this manner brought about by two different orders of people,
who had not the least intention to serve the public. To gratify the
most childish vanity was the sole motive of the great proprietors.
The merchants and artificers, much less ridiculous, acted merely from
a view to their own interest, and in pursuit of their own pedlar prin-
ciple of turning a penny wherever a penny was to be got. Neither
of them had cither knowledge or foresight of that great revolution
which the folly of the one and the industry of the other was gra-
dually bringing about.

It is thus that through the greater part of Europe the commerce
and manufactures of cities, instead of being the effect, have been the
cause and occasion of the improvement and cultivation of the
country.

This order, however, being contrary to the natural course of
things, is necessarily both slow and uncertain. Compare the slow
progess of those European countries of which the wealth depends
very much upon their commerce and manufactures, with the rapid
advances of our North American colonies, of which the wealth is
founded altogether in agriculture. Through the greater part of
Europe the number of inhabitants is not supposed to double in less
than five hundred years. In several of our North American colonies
it is found to double in twenty or five-and-twenty years. In Europe,
the law of primogeniture, and perpetuities of different kinds, prevent
the division of great estates, and thereby hinder the multiplication
of small proprietors. A small proprietor, however, who knows every
part of his little territory, who views it with all the affection which
property, especially small property, naturally inspires, and who upon
that account takes pleasure not only in cultivating but in adorning
it, is generally of all improvers the most industrious, the most

CHAP. iv. THE WEALTH OF NATIONS. 419

intelligent, and the most successful. 1 The same regulations, besides,
keep so much land out of the market, that there are always more
capitals to buy than there is land to sell, so that what is sold always
sells at a monopoly price. The rent never pays the interest of the
purchase-money, and is besides burdened with repairs and other
occasional charges, to which the interest of money is not liable.
To purchase land is everywhere in Europe a most unprofitable em-
ployment of a small capital. For the sake of the superior security,
indeed, a man of moderate circumstances, when he retires from
business, will sometimes choose to lay out his little capital in land.
A man of profession too, whose revefme is derived from another
source, often loves to secure his savings in the same way. But a
young man who, instead of applying to trade or to some profession,
should employ a capital of two or three thousand pounds in the
purchase and cultivation of a small piece of land, might indeed
expect to live very happily and very independently, but must bid
adieu, for ever, to all hope of either great fortune or great illustra-
tion, which \)y a different employment of his stock he might have
had the same chance of acquiring with other people. Such a person
too, though he cannot aspire at being a proprietor, will often disdain
to be a farmer. The small quantity of land, therefore, which is
brought to market, and the high price of what is brought thither,
prevents a great number of capitals from being employed in its
cultivation and improvement which would otherwise have taken
that direction. In North America, on the contrary; fifty or sixty
pounds is often found a sufficient stock to begin a plantation with.
The purchase and improvement of uncultivated land is there the
most profitable employment of the smallest as well as of the greatest
capitals, and the most direct road to all the fortune and illustration
which can be acquired in that country. Such land, indeed, is in
North America to be had almost for nothing, or at a price much
below the value of the natural produce; a thing impossible in
Europe, or, indeed, in any country where all lands have long been
private property. If landed estates, however, were divided equally

1 Evidence, corroborative of that which turns sand into gold/ See for illustra-
the author has mentioned here, is over- tions of this fact, Mr. Laing's Norway,
whelming. The effect of small tenancies, Mr. Thornton's Plea for Peasant Pro-
occupied by the owner of the soil, on tha prietors, in which the greatest number
general industry and morale of the country of facts are obtained from the Channel
was affirmed by Arthur Young in his well- Islands, and the authorities quoted by
known adage, that * the magic of property Mr. Mill.

E 6 2

420 THE NATURE AND CAUSES OF BOOK m.

among all the children, upon the death of any proprietor who left
a numerous family, the estate would generally be sold. So much
land would come to market, that it could no longer sell at a mono-
poly price. The free rent of the land would go nearer to pay the
interest of the purchase-money, and a small capital might be em-
ployed in purchasing land as profitably as in any other way. 1

England, on account of the natural fertility of the soil, of the
great extent of the sea-coast in proportion to that of the whole
country, and of the many navigable rivers which run through it,
and afford the conveniency of water carriage to some of the most
inland parts of it, is perhaps as well fitted by nature as any large
country in Europe to be the seat of foreign commerce, of manu-
factures for distant sale, and of all the improvements which these
can occasion. From the beginning of the reign of Elizabeth too,
the English legislature has been peculiarly attentive to the interests
of commerce and manufactures, and in reality there is no country
in Europe, Holland itself not excepted, of which the law is, upon
the whole, more favourable to this sort of industry. Commerce
and manufactures have accordingly been continually advancing
during all this period. The cultivation and improvement of the
country has, no doubt, been gradually advancing too ; but it seems
to have followed slowly, and at a distance, the more rapid progress
of commerce and manufactures. The greater part of the country
must probably have been cultivated before the reign of Elizabeth ;
and a very great part of it still remains uncultivated, and the culti-
vation of the far greater part much inferior to what it might be.
The law of England, however, favours agriculture not only indirectly
by the protection of commerce, but by several direct encourage-
ments. Except in times of scarcity, the exportation of corn is not
only free, but encouraged by a bounty. In times of moderate
plenty, the importation of foreign corn is loaded with duties that
amount to a prohibition. The importation of live cattle, except

1 If land in the United Kingdom were for its acquisition, would in all likelihood

relieved of the tedious and expensive raise its price fully as much as the increase

processes by which it is conveyed, and the in the saleatte quantity would tend to

customs of primogeniture and strict settle- depress the price. In Belgium, where it

nient were abandoned or forbidden, it is seems that the passion for acquiring land

difficult to determine whether land would and its use as an instrument of agriculture

be cheapened or rendered dearer. On are developed to the full, land yields the

the one hand, more would come into the lowest rate of interest as an investment ;

market. But the comparative ease of a proof that ready sale does not always

acquiring it, and the passion which exists induce cheapness.

CHAP, iv, THE WEALTH OF NATIONS. 421

from Ireland, is prohibited at all times, and it is but of late that
it was permitted from thence. 1 Those who cultivate the land,
therefore, have a monopoly against their countrymen for the two
greatest and most important articles of land produce, bread and
butcher's-meat. These encouragements, though at bottom perhaps,
as I shall endeavour to show hereafter, altogether illusory, sufficiently
demonstrate at least the good intention of the legislature to favour
agriculture. But what is of much more importance than all of
them, the yeomanry of England are rendered as secure, as inde-
pendent, and as respectable as law can make them. No country,
therefore, in which the right of primogeniture takes place, which
pays tithes, and where perpetuities, though contrary to the spirit of
the law, are admitted in some cases, can give more encouragement to
agriculture than England. Such however, notwithstanding, is the
state of its cultivation. What Would it have been, had the law given
no direct encouragement to agriculture besides what arises indirectly
from the progress of commerce, and had left the yeomanry in the same
condition as in most other countries of Europe ? It is now more than
two hundred years since the beginning of the reign of Elizabeth, a
period as long as the course of human prosperity usually endures.

France seems to have had a considerable share of foreign commerce
near a century before England was distinguished as a commercial
country. The jnarine of France was considerable, according to the
notions of the times, before the expedition of Charles VIII to
Naples. The cultivation and improvement of France, however, is,
upon the whole, inferior to that of England. The law of the country
has never given the same direct encouragement to agriculture. 2

The foreign commerce of Spain and Portugal to the other parts of
Europe, though chiefly carried on in foreign ships, is very consider-
able. That to their colonies is carried on in their own, and is much

1 The reader needs hardly be informed successful, is probable enough ; but the

that this state of things is now materially spirit of monopoly is always blind,

altered. The corn trade is relieved from 2 The law of ^rance, in the time in

the sliding scale of duties, and the small which Smith wrote, put agriculture under

remaining tax levied on it was abolished serious disadvantages. The tax levied on

in 1869. Foreign cattle may be in> the roturier was arbitrary, lands held by

ported, though there have been indirect the church and the aristocracy were free

attempts made to turn a temporary panic from the taille, and markets between

due to the cattle plague into a perma- province and province were prohibited

inent means for reviving protection in Like the manufacturer and merchant, the

favour of the home producer of stock. agriculturist only wants to be let alone.

That no real benefit would come to the He has no peculiar burdens, and needs

producer, in case such machinations were no peculiar privileges.

422 THE NATURE AND CAUSES OF BOOK in.

greater, on account of the great riches and extent of those colonies.
But it has never introduced any considerable manufactures for distant
sale into either of those countries, and the greater part of both still
remains uncultivated. The foreign commerce of Portugal is of older
standing than that of any great country in Europe, except Italy.

Italy is the only great country of Europe which seems to have
been cultivated and improved in every part by means of foreign
commerce and manufactures for distant sale. Before the invasion of
Charles VIII, Italy, according to Guicciardini, 1 was cultivated not
less in the most mountainous and barren parts of the country than
in the plainest and most fertile. The advantageous situation of the
country, and the great number of independent states which at that
time subsisted in it, probably contributed not a little to this general
cultivation. It is not impossible too, notwithstanding this general
expression of one of the most judicious and reserved of modern
historians, that Italy was not at that time better cultivated than
England is at present.

The capital, however, that is acquired to any country by com-
merce and manufactures, is all a very precarious and uncertain
possession till some part of it has been secured and realized in the
cultivation and improvement of its lands. A merchant, it has been
said very properly, is not necessarily the citizen of any particular
country. It is in a great measure indifferent to him from what
place he carries on his trade; and a very trifling disgust will make
him remove his capital, and together with it ail the industry which
it supports, from one country to another. No part of it can be said
to belong to any particular country till it has been spread as it were
over the face of that country, either in buildings, or in the lasting
improvement of lands. No vestige now remains of the great wealthy
said to have been possessed by the greater part of the Hansc towns,
except in the obscure histories of the thirteenth and fourteenth
centuries. It is even uncertain where some of them were situated,
or to what towns in Europe the Latin names given to some of them
belong. But though the misfortunes of Italy in the end of the
fifteenth and beginning of the sixteenth centuries greatly diminished
the commerce and manufactures of the cities of Lombarcly and
Tuscany, those countries still continue to be among the most
populous and best cultivated in Europe. The civil wars of Flanders,

1 Book i. p. i, in Fenton's folio, 1618.